TaxTMI 
TaxTMI 
2020 (1) TMI 722
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....ated Enterprises (AE). 3. Brief facts are, the assessee, a resident company, is stated to be a joint venture of Mahindra & Mahindra (M&M) and International Truck and Engine Mauritius Holding Ltd. (ITEMH) which in turn is a step down subsidiary of Navistar International Corporation Inc. (NIC) of USA. The assessee is basically engaged in manufacture of diesel engines for 16T and 49T vehicles and supplies the engines primarily to Mahindra Navistar Automobiles Ltd. (MNAL) which has entered into joint venture for manufacturing trucks. For the assessment year under dispute, the assessee filed its return of income on 29th November 2012, declaring loss of Rs. 63,97,93,497. Noticing that during the year under consideration, the assessee had entered into international transaction with its AE, the Assessing Officer made a reference to the Transfer Pricing Officer for determining the ALP of the international transaction. In the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee had entered into an intellectual property agreement with Navistar Luxemburg Intellectual Co. on 1st November 2007, who is the sub-licensee of the base engine intellectual propert....
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....ering the rival submissions and having perused the material on record, we find that identical dispute relating to the determination of arm's length price of royalty paid to the AE arose in assessment year 2010-11 and the Transfer Pricing Officer, on more or less on similar reasoning, has determined the arm's length price of royalty paid to the AE at nil. When the dispute ultimately came up for consideration before the Tribunal in the order referred to above, the Co-ordinate Bench restored the issue back to the Assessing Officer/Transfer Pricing Officer with the following observations:- "10. Upon careful consideration, we find that TPO in this case has asked the assessee to submit benchmark analysis report done on the basis of royalty research database. The assessee could not provide the same when proceedings were going on before the TPO. The same could be provided only before DRP. Learned DRP asked for the remand report from the TPO. Learned TPO refused to offer any comment on the documents submitted by the assessee on the ground that the same was not submitted earlier before him. Despite this learned DRP accepted the additional evidence and proceeded to observe t....
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....It was submitted, since the said incentive is for generation of employment through industrial development, it is in the nature of capital receipt, hence, not taxable. The Assessing Officer did not accept the claim of the assessee. He observed, the assessee has not received any amount from the State Government under the incentive scheme, but from MNAL. Accordingly, he added back the same to the income of the assessee. Similarly, on identical reasoning, the Assessing Officer treated the Sales Tax refund / subsidy of Rs. 2,74,64,654, as revenue receipt and made it taxable at the hands of the assessee in the assessment year 2013-14. Being aggrieved with the aforesaid additions, the assessee raised objections before learned DRP. 10. Learned DRP, after considering the submissions of the assessee, did not find merit in them. Learned DRP observed, the assessee has not received any Sales Tax refund / subsidy directly from the State Government but has received from another group company. They observed, no eligibility certificate has been issued in the name of the assessee for availing Sales Tax refund / subsidy. Therefore, they rejected the objections of the assessee. 11. The learned A....
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....sses on the IPS to the assessee to the extent of VAT paid by the assessee on engines manufactured and sold to MVML and used in the commercial vehicles manufactured and sold by MVML to MNAL. He submitted, though, the eligibility certificate has been issued in the name of MVML being the SPV as per the MoU, however, the assessee is eligible to receive IPS on the VAT paid on engines manufactured by it and sold to MVML. He submitted, though, IPS as a whole was granted to MVML, however, IPS to the extent of VAT paid by the assessee on engines sold was distributed to the assessee by MVML. Hence, the receipt being in the nature of a capital receipt is not taxable. The learned Authorised Representative submitted, merely because the eligibility certificate is not in the name of the assessee, IPS received cannot be treated as revenue in nature ignoring all other facts and materials brought on record including the MoU between the Government of Maharashtra and Mahindra & Mahindra Ltd. He submitted, in case of MVML, the Tribunal has upheld the decision of learned Commissioner (Appeals) in treating IPS as a capital receipt. Thus, he submitted, IPS/Sales Tax refund received by the assessee is n....
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....oint venture companies by making eligible investments. The MoU also provided that benefits / incentives under the IPS would be available with regard to the eligible investments. Thus, as could be seen from the facts on record, in terms of MoU between the Government of Maharashtra and M & M, MVML was created as a SPV to carry out the project of manufacturing and sale of commercial vehicles for which various components were provided by affiliates / subsidiary companies and one such company being the assessee, provided the engines for the commercial vehicles. It is the contention of the assessee, though, the eligible certificate has been issued in the name of the SPV but the entire project is being carried out by a consortium of companies and the assessee is a part of it. Therefore, the benefit IPS is available to all companies, including the assessee, forming the consortium. On a perusal of the MoU as well as the eligibility certificate, the aforesaid claim of the assessee to some extent appears to be acceptable. Therefore, merely because the eligibility certificate has been issued in the name of the SPV, it cannot be said that the entire eligible investment has been made by the S....
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....overnment for implementing the scheme. Learned DRP has further observed that no details and evidences were provided regarding the agreement between the consortium members for allocation of benefit of Sales Tax refund received by the eligible units which set-up the mega project and the basis for such allocation. They have also observed that no evidence was produced whether such agreement, if there is one, has been recognized by the State Government. Learned DRP has observed that no details and evidences were furnished regarding the extent of Sales Tax refund receivable by the sister concern which holds the eligibility certificate, the basis on which it was allocated partly to the assessee and the treatment given to the allocated portion in the books of account of the sister concern. Thus, from the aforesaid observations of learned DRP it becomes clear that rejection of assessee's claim was also due to lack of supporting evidence. Though, the paper book submitted before us contains agreements between the assessee and MNVL for sharing of IPS, however, it does not contain the MoU between the Government of Maharashtra and M & M. Though, a copy of the aforesaid MoU was filed before us....