TaxTMI 
TaxTMI 
2019 (3) TMI 1537
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....ed Enterprises (AEs). The two international transactions with AEs which are subject matter of appeal are as under: Name of the company Description Amount BIEC International Inc. Payment of Technical assistance fees 14,300,000 BlueScope Steel Ltd. Australia Receipt of project management services 3,391,555 The Transfer Pricing Officer (TPO) issued show cause notice to the assessee in respect of payment towards technical assistance fees Rs. 14,300,000/- and payment for project management and other services Rs. 1,54,78,224/-. The assessee furnished various documents to show the services received by the assessee from its AEs. However, TPO concluded that documentation provided by the assessee does not prove the services rendered. The TPO determined the Arm's Length Price (ALP) of the above said two transactions as 'Nil'. On the basis of order of TPO, the Assessing Officer passed draft assessment order making upward adjustment of Rs. 2,99,08,224/-. 3. Aggrieved by the additions proposed by TPO, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP vide directions dated 26.12.2014 rejected the contentions of the assessee and uphel....
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....Panel, given in Para 8 against Objection No.2, to make the adjustments only in respect of amount determined u/s.154 of the Income Tax Act, 1956 ("the Act") on disposal of rectification application of the Appellant instead of considering the amount of Rs. 1,54,78,224 as per the draft assessment order. WITHOUT PREJUDICE TO GROUND NO. II: ADDITIONAL GROUND NO. VI: ADOPTING INCORRECT VALUE OF PROJECT MANAGEMENT FEES: On the facts and in the circumstances of the case and in law, the Ld. AO be directed to make the adjustment with regards to project management fees on the value as reported by the Appellant i.e. Rs. 33,91,555 instead of Rs. 1,54,78,224." 5. Shri Yogesh A. Thar appearing on behalf of the assessee submitted that during the period relevant to assessment year under appeal, the assessee was in the process of setting up a new manufacturing facility at Jamshedpur for coated steel. The assessee received Technical Assistance Services and Project Management Services from its AEs for which the assessee paid fee Rs. 1,44,300,000/- and Rs. 33,91,555/-, respectively. The assessee capitalized the payments made for both the above services and did not....
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.... iii) ATC Telecom Tower Corporation (P.) Ltd. Vs. Deputy Commissioner of Income Tax, 154 ITD 95 (Mumbai-Trib.) iv) Equinox Business Parks (P.) Ltd. Vs. Union of India, 55 taxmann.com 222 ( Bombay) 5.3 The ld. AR raising alternate contention submitted that where expenditure is in the capital field, it does not give rise to any income in itself. Therefore, no adjustment can be made for the difference between declared value and ALP of such international transaction. In other words, transfer pricing provisions do not apply to Capital account transactions. The Tribunal in the case of Honda Motorcycle & Scooters India Pvt. Ltd. Vs. ACIT, in ITA No.1379/Del/2011 dated 13.04.2015 held that the depreciation on such assets being a revenue offshoot of the capital transaction will be required to be recomputed on the basis of value of fixed assets determining ALP applying the most appropriate method under Chapter X. 5.4 The ld. AR further contented that the Authorities below have rejected the transactions at the outset without ascertaining the ALP as per method prescribed u/s. 92C of the Act disallowing the payments without applying any of the prescribed method is an action whic....
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....Appellate Rules, 1962, the assessee was required to furnish information and documents. However, no such documentation was maintained by the assessee with respect to the international transactions. The ld. DR prayed for dismissing the appeal of the assessee and upholding the impugned order. 6.1 The ld. DR asserted that though in the assessment year under appeal, no deduction has been claimed by the assessee. The assessee will eventually claim deduction in the form of depreciation in the subsequent year when the project of the assessee would become operational. Therefore, transfer pricing adjustments are required to be made in the year in which the alleged services are claimed to have been received. In support of her submissions, the ld. DR placed reliance on the decision in the case of Eaton Technologies (P.) Ltd. Vs. Deputy Commissioner of Income Tax, reported in 32 taxmann.com 103 (Pune-Trib.). Since the assessee failed to prove the benefit received from the services or the rendering of services, the same were valued at 'Nil'. 7. Controverting the submissions advanced by DR, the ld. AR submitted that a bare perusal of the provisions of section 92 of the Act would make it cle....
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....ives liberty to the assessee to furnish any information, data or documents relating Associate Enterprises which may be relevant for determining ALP. The provision of Section 92C lays down the procedure for determining ALP. The TPO while determining ALP/transaction has got limited jurisdiction to ascertain the ALP of the transaction. The TPO cannot sit in judgment to ascertain whether services are indeed required by the assessee or not. It is beyond the scope of TPO's jurisdiction to comment on the requirement of the services by the assessee. The Hon'ble Delhi High Court in the case of CIT Vs. EKL Appliances Ltd. reported as 345 ITR 241 has held: ".....it is not necessary for the assessee to show that any legitimate expenditure incurred 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 else....." 9. The Mumbai Be....
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....tation is necessary because of the impact of such a transaction of capital nature on the transactions of its revenue offshoots. In our present context, the international transaction of purchase of fixed assets is required to be benchmarked as per the most appropriate method. The application of the ALP, if required, will give rise to the recomputation of the revised value of the purchase of fixed assets. Such an increase in the value of the ITA No.1379/Del/2011 fixed assets, being a capital transaction in itself, will not give rise to any addition towards transfer pricing adjustment, but the depreciation on such assets, being a revenue offshoot of the capital transaction, will be required to be recomputed on such revised value...." 12. Thus, in view of the fact that the TPO in the instant case at the outset had determined the services i.e. technical assistance and project management services at 'Nil' without determining ALP of the transactions, hence, we deem it appropriate to restore the ground No.1 and 2 of the appeal back to the file of TPO/Assessing Officer to ascertain the ALP of the transactions by adopting most appropriate method prescribed under the Act. The assessee is g....