TaxTMI 
TaxTMI 
2020 (8) TMI 172
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....9/- as determined by the Appellant. 2. determining the arm's length price of the Appellant's international transaction of payment of regional administration and regional coordination cost allocation at Nil instead of Rs. 2,83,61,859/- as determined by the Appellant. 3. determining the arm's length price of the Appellant's international transaction of payment of information technology cost allocation at Rs. 50,00,000/- instead of Rs. 260,06,610/- as determined by the Appellant. 4. deeming an adjustment of Rs. 15,20,688 on account of late recovery of expenses from associated enterprises. 5. disallowing the foreign travel expenses of Rs. 7,41,721. 6. erred in not granting credit of Tax Deducted at Source of Rs. 1,91,87,629 pertaining to income offered to tax in AY 2008-09. 3. Briefly stated, the facts of the case are that the appellant filed its return of income for the assessment year (AY) 2008-09 on 29.09.2008 declaring total taxable income of Rs. 32,11,98,407/-. The appellant is a wholly owned subsidiary of BCG Holding Corporation, USA ('BCG Hold Co.'). It commenced its operations from May 2000. The appellant, like the gro....
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....billing system with electronic time sheet capabilities, with an intention to integrate BCGs Worldwide Reporting System and facilitate international co-ordination. The BCG Holding Corporation has provided the license to the appellant vide a technology licensing and assistance agreement dated 01.01.2005 in consideration for royalty @ USD 2750 per employee per annum which has resulted in the payment of aforesaid amount of Rs. 1.62 crore during the year. However, the TPO was not convinced with the above submission of the assessee and made an adjustment of the entire amount, considering the value of the transactions to be Nil. While making the disallowance, the TPO has stated that the software had been installed many years ago and its shelf life had expired. The AO following the direction of the DRP made an adjustment of Rs. 1,62,74,359/-. The 2nd adjustment made by the TPO is towards regional cost allocation. The facts are that BCG Hong Kong is the hub for providing regional training, administration and co-ordination assistance to each of the BCG entities in the Asia Pacific Region (within which BCG India falls) so that the activities of those entities are synchronized with world....
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....air cost allocation where the appellant has remitted Rs. 2,60,06,610/- for allowing its employees to use certain commonly used softwares, thereby paying much more than what a company in ordinary uncontrolled situation would like to spend for the purpose. The TPO treated Rs. 50,00,000/- as ALP for availing the above services under the head information technology. Thus he made an adjustment of balance amount of Rs. 2,10,06,610/-. The AO following the order of the DRP made an addition of Rs. 2,10,06,610/-. 5. Before us, the Ld. counsel for the appellant submits that the TPO is required to determine ALP in accordance with one of the prescribed methods, whereas in the instance case, he has failed to do so. In this regard, reliance is placed by him on the judgment of the Hon'ble Bombay High Court in CIT v. Lever India Exports Ltd. (ITA No. 1306, 1307, 1349 of 2014), CIT v. Merek Ltd. (ITA No. 272 of 2014), CIT v. Kodak India Pvt. Ltd. (ITA No. 15 of 2014, CIT v. Johnson and Johnson Ltd. (ITA No. 1291 of 2014). Further, reliance is placed by him on the order of the Tribunal in ACIT v. Netafim Irrigation India Pvt. Ltd. (ITA No. 3668/Mum/2008 & ITA No. 4837/Mum/2009), Elkem South Asia P....
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....AE to provide technical knowhow/consultancy in 12 fields as indicated therein for a consideration of Rs. 1.57 crores. The respondent-assessee availed services of its AE during the subject year (AY 2003-04) only in 3 out of 12 fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs. 1.57 crore is attributable to the 3 technical services which the respondent-assessee availed of and held that no consideration was payable in respect of 9 services provided for in the agreement. Thus the entire payment of Rs. 1.57 crore was attributable only to the 3 services availed out of the 12 listed out in the agreement. It further held that only Rs. 40 lacs could be considered as ALP attributable to 3 services and made adjustment of Rs. 1.17 crore resulting in its addition to the taxable income. In appeal, the CIT(A) upheld addition of Rs. 1.17 crores made and taxable income consequent to the adjustment made on account of technical knowhow/consultancy agreement. On further appeal, the Tribunal upheld the submissions of the respondent-assessee and recorded further the fact that no transfer pricing exercise was done by the AO/TPO to determine the valu....
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....o be done only by following one of the methods prescribed under the Act. (iv) In view of the above, as the Revenue has not acted in accordance with the clear mandate of law, the questions as proposed does not give rise to any substantial question of law. Thus, not entertained." In M/s Kodak India Pvt. Ltd. (supra), the above position of law is reiterated by the Hon'ble Bombay High Court. As mentioned earlier, we notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. In view of the above factual scenario, we are of the considered view that the ratio laid down by the Hon'ble Bombay High Court in Lever India Exports Ltd.; Merck Ltd.; Johnson & Johnson Ltd. and Kodak India Pvt .Ltd. mentioned hereinabove is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal. 8. The 4th ground of appeal relates to adjustment of Rs. 15,20,688/-....
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....foreign travel expenses of Rs. 7,41,721/- by the AO. During the course of assessment proceedings, the AO noticed that the assessee has claimed deduction of Rs. 7,41,721/- on account of 'foreign travel expenses' which were incurred for other than employees. Observing that the assessee was not able to bring out adequate evidence to justify its claim of business expediency, the AO made a disallowance of the above amount by relying on the decision of the Hon'ble Gujarat High Court in Shahibag Entrepreneurs Ltd. 215 ITR 810. 12. The Ld. counsel submits that in the given case the spouses have accompanied only at the request of the BCG Holdco, organizing the meet and fringe benefit tax has been paid on these expenses. It is stated that the employees were invited along with their spouses to the meet to ensure sufficient networking and bonding within the personnel of the entire group. Thus it is stated that the appellant is a corporate entity and incurs such expenses on its employees which it finds expedient from a business and employee morale perspective. On the other hand, the Ld. DR submits that the addition of Rs. 7,41,721/- made by the AO which is based on facts of the case....