TaxTMI 
TaxTMI 
2019 (5) TMI 679
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....d in the circumstances of the case, and in law, the Honorable Dispute Resolution Panel ('Hon'ble DRP'), and the Learned Assessing Officer ('Ld. AO') pursuant to the directions of the Hon'ble DRP, erred in making a TP adjustment of Rs. 4,65,17,750 to the income of the Appellant by holding that the Appellant's international transaction pertaining to payment of commission does not satisfy the arm'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 (....
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.... applying Rule 8D should be deleted as the Appellant has suo-moto disallowed expenses of Rs. 39,32,077 directly attributable to the exempt income. Ground No.9 9. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/ Ld. AO has erred in not granting enhanced deduction under Section 10A of the Act based on the disallowances made in the Assessment Order. The Assessee prays that enhanced deduction under Section 10A of the Act on the disallowances made by the Ld. AO should be granted to the Appellant. Common Grounds Ground No.10 10. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in charging interest under section 234B of the Act. The Appellant prays that the charge of interest under section 234B of the Act should not deleted. Ground No.11 11. On the facts and the circumstances of the case, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act. The Appellant prays that the penalty proceedings ought to be dropped. 4. The ground of appeal Nos.1 to 5 raised by assessee are against transfer pricing ad....
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....anel (DRP), which were dismissed. The Assessing Officer thus, in the final assessment order made an upward adjustment of Rs. 4.65 crores. 6. We find that similar issue of payment of commission @ 6% on its sales arose before the Tribunal in assessee's own case in ITA No.723/PUN/2017, relating to assessment year 2012-13. The Tribunal vide order dated 01.02.2019 has noted the rendering of services by TTPL and has held that Commission Agreement dated 01.12.2007 existed between the assessee and TTPL and as per clauses of the said agreement, it was clear that TTPL was facilitating purchases in respect of assessee from Dassault, UK. Further, it was responsibility of TTPL to undertake marketing efforts to telemarketing and inbound enquiries through its dedicated support. The assessee had further furnished evidences demonstrating that the purchase of software license was done by the assessee from Dassault, UK and TTPL was facilitating the entire process in ensuring smoothing selling of transactions. In view of tangible evidence filed by assessee, the Tribunal held that payment of commission was justified. Following the same parity of reasoning, we hold that no upward adjustment merits to....
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.... & 549/2015, judgment dated 23.08.2017. He referred to paras 39 and 52 of the said decision. The learned Authorized Representative for the assessee on without prejudice basis also pointed out that since own funds were more than investments made, then there was no merit in making any disallowance under Rule 8D(2)(ii) of the Rules. In respect of application of Rule 8D(2)(iii) of the Rules, the learned Authorized Representative for the assessee pointed out that only 0.5% of investments need to be disallowed i.e. only those investments which have yielded dividend. 12. The learned Departmental Representative for the Revenue in this regard pointed out that as far as recording of satisfaction by the Assessing Officer is concerned, there is no proper format provided and facts of each case need to be seen. Our attention was drawn to para 4.4 at page 5 of the draft assessment order. 13. We have heard the rival contentions and perused the record. The Assessing Officer while passing draft assessment order notes that the assessee had shown dividend income of Rs. 14,34,29,601/- and also Rs. 16,81,61,491/- on account of claim of exemption of 10AA of the Act. The Assessing Officer further no....
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....ce being not warranted in the hands of assessee, which was on without prejudice basis. The first plea of assessee is that it had own funds which were more than its investments and hence, no disallowance under Rule 8D(2)(ii) of the Rules. This argument of assessee needs verification at the end of Assessing Officer. Accordingly, we direct the Assessing Officer to verify the claim of assessee in this regard and in case own funds of assessee are more than investments, then no disallowance is warranted under Rule 8D(2)(ii) of the Rules on account of dictate of the Hon'ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom). 17. Now, coming to second disallowance made i.e. under Rule 8D(2)(iii) of the Rules. The Assessing Officer is again directed to work out the disallowance by considering investments which have yielded dividend income. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee in this regard. The ground of appeal No.8 is thus, allowed for statistical purposes. 18. The last issue raised vide ground of appeal No.9 is the claim of enhanced deduction under section 10A of the Act. 19. The plea of assessee in this ....
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.... 3. On the facts and in the circumstances of the case, and in law, the Ld AO /Ld DRP/Ld TPO erred in modifying/ introducing additional quantitative filters and conducting a fresh benchmarking analysis without sharing a detailed step by step search strategy and the Functional, Assets and Risk ('FAR') analysis conducted. The Appellant prays that the ALP determined by the Appellant in the TP study report for international transactions pertaining to DES segment ought to be accepted. 4. On the facts and in the circumstances of the case, and in law, the Ld. AO/Ld DRP/Ld TPO erred in applying a turnover filter at 1/10th to 10 times of the Appellant's total turnover in DES segment and thereby rejecting functionally comparable companies selected by the Appellant in the TP study report. The Appellant prays that the turnover filter applied at 1/10th to 10 times of the Appellant's turnover in DES segment ought to be rejected. 5. On the facts and in the circumstances of the case, and in law, the DRP/ Ld. AO/Ld. TPO erred in applying export sales to total sales less than 75% as a filter in the benchmarking analysis and thereby rejecting functi....
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....omputing the ALP of the international transaction of payment of commission as NIL instead of INR 5,24,24,881 as determined by the Appellant. The Appellant prays that the TP analysis conducted by the Appellant ought to be accepted and consequently the TP adjustment ought to be deleted. 11. While doing so, the Ld. AO/Ld. DRP/Ld. TPO grossly erred in: a) ignoring that the Appellant had supported the claims with appropriate evidences; b) challenging the commercial rationale and expediency of availing services by the Appellant; c) ignoring that the Appellant is not required to establish the benefit arising out of the said services; d) rejecting the comparability analysis carried out by the Appellant to demonstrate Arm's Length Price ('ALP') without giving any finding on the comparable companies adopted; and e) not applying any of the prescribed methods for benchmarking the transaction and not providing any valid comparable uncontrolled transaction to determine the ALP. The Appellant prays that the TP analysis conducted by the Appellant ought to be accepted and consequently the TP adjustment ought to be d....
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....cept for the issues raised vide ground of appeal Nos.1 to 8 against transfer pricing adjustment made in Manufacturing Segment, all the other grounds of appeal are similar to the grounds of appeal raised in assessment year 2013-14. He then, took us through the individual grounds of appeal. 24. We find that ground of appeal Nos.9 to 11 raised by assessee are on account of transfer pricing adjustment made for payment to commission to associate enterprise. We have already adjudicated this issue while deciding ground of appeal Nos.1 to 5 in assessment year 2013-14 and following the same parity of reasoning, the issue is allowed in the hands of assessee. 25. The issue raised in ground of appeal Nos.12 and 13 is on account of claim of amortization of premium paid on leasehold land and allowance of provision made for expenditure in respect of Bhavishya Kalyan Yojana has also been addressed while deciding ground of appeal Nos.6 and 7 in assessment year 2013-14. Both these issues stand decided against assessee. Hence, ground of appeal Nos.12 and 13 are dismissed. 26. The issue in ground of appeal No.14 is disallowance made under section 14A of the Act read with Rule 8D of the Rules.....
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....;s length price. However, the TPO rejected all five concerns picked up by the assessee and selected two concerns as comparables i.e. Eclerx Services Ltd. and Tata Elxsi Ltd., whose mean margins worked out to 45.19%. The assessee before the TPO filed segmental details of AE segment. However, the TPO rejects the same since the accounts were not audited. The DRP also rejected the same as the assessee himself in the TP study report had taken entity level results. 34. The learned Authorized Representative for the assessee pointed out that though before the DRP, audited segmental accounts were filed but DRP rejects the claim of assessee. In this regard, he stated that the law does not require data of segmental details to be audited, however, before the DRP, it filed segmental details and as per the segmental details, the margins of assessee for AE segment worked out to 44.44%. Our attention was drawn to page 287 of Paper Book, under which segmental details are provided. The learned Authorized Representative for the assessee stressed that DRP / TPO should have accepted segmental details. He then, referred to provisions of section 92 of the Act and pointed out that requirement is to ben....
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....lly selected and also referred to various decisions on the point and in final analysis held the concern Eclerx Services Ltd. to be comparable. Further, the DRP noted that the assessee had furnished additional evidence in the form of certificate for segmental breakup, from which it was clear that services to associated enterprise were at Rs. 295 crores vis-a-vis third party at Rs. 467 crores. The assessee thus, proposed that operating margins using segmental details should be adopted. The DRP did not find any merit in accepting any additional evidence contrary to the basic study conducted in the statutory requirement under Form No.3CEB audit report. The claim of assessee of proportionate adjustment for computing arm's length price was also rejected. The Assessing Officer passed final assessment order, against which the assessee is in appeal. The assessee has raised several issues against transfer pricing in its hands, but at the outset, it has been pointed out by the learned Authorized Representative for the assessee that in case ground of appeal No.2 is allowed i.e. audited segmental information is applied for benchmarking international transactions, then no adjustment remai....