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2019 (5) TMI 1796
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....018. 3. Ground No.1 raised by the assessee is general in nature and hence does not require adjudication. 4. Ground No. 2 raised by the assessee relates to determination of arms' length price by the Assessing Officer / TPO / DRP for management support services received by the assessee. 5. When this appeal was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 04.04.2018, passed by the Tribunal in assessee's own case in I.T.A. No. 2489/Kol/2017, for assessment year 2013-14, whereby the issue of management support services (MSSA) have been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 6. The ld. DR relied upon the orders of the authorities below. 7. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 04.04.2018. In this order, the Tribunal has inter alia observed as under: "6. We have heard the rival submissions and perused the mater....
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.... The assistance may relate to : a. the distribution and trading of products, particularly with respect to advertising, sales promotion, public relations, market research (in particular, information and trends on the world market), labeling, packaging, shipping and forwarding, long-term export business and international public tendering and purchasing from Third parties; b. advice and support with respect to the supply of requirements of the Company from other resources ; c. financial, accounting and auditing matters relating to such subjects as: i. accounting and auditing principles and methods; ii. budgeting methods; iii. capital structure, loans, exchange risks, financial research, warranties and guarantees, credit management, the establishment and management of finance and lease companies and all further banking activities, including long-term finance plans; iv. development of data processing d. fiscal and legal matters , including patents, trademarks and customs duties, particularly in international transactions ; e. personal matters particularly with respect to : i. the selection and tr....
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....10.2004 onwards. We also find that Article 6 of MSSA enclosed in page 294 of the Paper Book on 'Taxes' is as under:- The costs, taxes, stamp duties and similar charges arising out of this agreement shall be borne by the Company (assessee) if such amounts are due in the Country, and by Philips if such amounts are due outside the Country with the exception of : a. taxes which can be claimed back or credited against tax by the Company in accordance with the legal provisions which shall be chargeable to the Company; and b. taxes which can be claimed back or credited against tax by Philips in accordance with the legal provisions, which shall be chargeable to Philips. The ld AR argued that the assessee had complied with the TDS obligations on the subject mentioned payments and the same has been accepted by the department. He also referred to the summary of emails from Pages 333 to 378 and further emails which are enclosed in Exhibit II from pages 800 to 854 of Paper Book. He also referred to the exclusion of 12000000 Euros towards the Shareholder function costs in the overall cost allocation to the assessee company which is enclosed in page 795 o....
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....ld DRP in in para 39 of the said order (enclosed in page 1040 of paper book) had further held that the consideration of all these facts leads to the conclusion that the deliverables under the MSSA are predominantly in the form of 'commercial knowhow' and not commercial services and therefore covered by the definition of the term 'Royalty' under Article 12 of the DTAA. 4.3.3.4. From the above it would be clear that the receipts in respect of MSSA would be taxable either as FTS (to the extent they are services rendered) or Royalty (to the extent it is providing commercial know-how or commercial experience). As both FTS and Royalty are taxable at the same rate under the DTAA, it does not matter that there is no clear cut separation or quantification in the MSSA of the service and the know-how portions. The entire receipts would be chargeable to tax in India under the DTAA as well as the I.T. Act. 4.2.1. Hence based on the aforesaid order of ld DRP in the hands of KPENV for the Asst Year 2009-10, we find that the ld DRP had treated the receipts of Management Support Services Charges from assessee herein (i.e. Philips India Ltd) in the hands of KPENV as FTS or Royalty ....
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....ssee out of these services by way of substantial cost reduction and increase in turnover substantially cannot be swept under the carpet. We find that no adjustments to ALP was made in the Asst Years 2005-06 to 2008-09 in respect of the very same MSSA by the ld TPO for the assessee. We find that the principles of consistency need to be followed and cannot be given a go by when there is no change in the facts and circumstances of the case from the earlier years. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Radhasaomi Satsang vs CIT reported in (1992) 193 ITR 321 (SC) . 4.6. We find that the decision relied upon by the ld AR on the Hon'ble Delhi High Court in the case of CIT vs Cushman and Wakefield (India) (P) Ltd reported in (2014) 367 ITR 730 (Del) is well founded wherein it was held that :- "35. The Transfer Pricing Officer's report is, subsequent to the Finance Act, 2007, binding on the Assessing Officer. Thus, it becomes all the more important to clarify the extent of the Transfer Pricing Officer's authority in this case, which is to determining the arm's length price for international transactions re....
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....ved as under:- 27. The Hon'ble High Court of Delhi in the case of CIT v. EKL Appliances Ltd.[2012] 345 ITR 241/24 taxmann.com 199/209 Taxman 200 as well as CIT v. Cushman & Wakefield (India) (P.) Ltd.[2014] 367 ITR 730/46 taxmann.com 317 (Delhi), rendered similar ruling as was rendered in the case of Dresser-Rand India (P.) Ltd. (supra). In the case of Cushman & Wakefield India (P.) Ltd. (supra), the Hon'ble Delhi High Court observed that whether a third party - in an uncontrolled transaction with the Taxpayer would have charged amounts lower, equal to or greater than the amounts claimed by the AEs, has to perforce be tested under the various methods prescribed under the Indian TP provisions. In the context of cost sharing arrangement, the Hon'ble High Court opined that concept of base erosion is not a logical inference from the fact that the AEs have only asked for reimbursement of cost. This being a transaction between related parties, whether that cost itself is inflated or not only is a matter to be tested under a comprehensive transfer pricing analysis. The basis for the costs incurred, the activities for which they were incurred, and the benefit accruing ....
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....at an arm's length price or not is not dependent on whether transaction results in an increase in assessee's profit; mere failure to establish that transactions resulted in a profit does not indicate that they were not at an arm's length price and even if profit is established, it does not necessarily follow that transaction was at an arm's length price - Held, yes [Para 21] We find that this judgement had approved the earlier decision of Hon'ble Delhi High Court in the case of Cushman and Wakefield (India) (P) Ltd supra and also the decision of EKL Appliances supra. 4.9. In view of the aforesaid findings and respectfully following the judicial precedent relied upon hereinabove, we hold that the determination of ALP for Management Support Services at Rs NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of Rs. 125,27,30,863/- is deleted. Accordingly, the Ground Nos 2 & 3 raised by the assessee are allowed. We find that there is no change in the facts and circumstances during the year under appeal with regard to MSSA when compared to that in the earlier years and hence respectfully following the judicial preced....
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....nce the contention of the ld DR that assessee is only distributor, is not emanating from the records of the lower authorities. We find that the issue under dispute before us is squarely addressed by this tribunal in assessee's own case for the Asst Year 2011-12 supra wherein it was held :- "43. We have heard the rival submissions and perused the materials available on record. The preliminary issue here arises whether the AMP expenses constitute the international transactions so as to attract the provisions of transfer pricing of the Income Tax Act, 1961. The claim of the Ld. AR is that the AMP transaction does not represent the international transaction between the AE's therefore no question of determining the ALP of AMP transactions. We find force in the argument of the ld. AR in the given facts and circumstances. Therefore, in our considered view the AMP cannot be regarded as international transaction. In holding so we find the support & guidance from the judgment of Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited vs. CIT reported in 381 ITR 117 wherein it was held as under: "51. The result of the above discussion is that in the conside....
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.... whereby the issue of determination of arm's length price for information technology services (IT services) have been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 17. The ld. DR relied upon the orders of the authorities below. 18. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 15.12.2017. In this order, the Tribunal has inter alia observed as under: 15. We have heard the rival contentions & perused the materials available on record. In this regard we find that the ld. DRP has deleted the addition made by the TPO in own cases of the assessee pertaining to other assessment years as discussed above. Thus, the assessee has been claiming the IT expenses for the last several years and the same was not denied and therefore in our view principle of consistency should be applied in the instant case. In this connection we are relying on the decision of Hon'ble Supreme Court in the case of ....
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....e revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. We find no reason to interfere in the order of the division bench and the same is hereby upheld. Therefore, respectfully following the decision of Co-ordinate Bench we allow ground No. 5 raised by the assessee. 20. Ground No. 6 raised by the assessee relates to variation of 3% from the arithmetic mean. 21. The ld. Counsel for the assessee informs the Bench that the assessee does not wish to press this ground therefore we dismiss the ground No. 6 raised by the assessee, as not pressed. 22. Ground No. 7 raised by the assessee relates to objectionspertaining to adjustments made by the TPO on a without prejudice basis in respect of the other segments namely consumer Lifestyle Distribution, Healthcare distribution and Healthcare contract Manufacturing division. 23. When this this was called out for hearing the ld. Counsel for the assessee invited our attention to the order dated 07.02.2018, passed by the Tribunal in assessee's own case in I.T.A. No. 612/Kol/2017 for assessment year 2012-13, whereby the issue of objection pertaining to adjustments made by the TPO on a w....
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....ations made by the ld TPO had been completely ignored by the ld DRP and in the giving effect order to DRP directions and in the final assessment order. Accordingly, the said observations would have no relevance in the proceedings for the assessee and there is no grievance that could be caused to the assessee in that regard. There is no impact for the assessee pursuant to the aforesaid passive observations of the ld TPO. The various contentions raised by the assessee are left open in view of giving effect order to DRP passed by the ld TPO and final assessment order passed by the ld AO. Hence we are of considered opinion that adjudication of Ground No. 6 raised by the assessee would be superfluous." 26. The said issue is also covered by the assessee's own case in I.T.A. No. 2489/Kol/2017, for assessment year 2013-14, order dated 04.04.2018, wherein the Tribunal has inter alia observed as under: "14. The Ground no. 7 raised by the assessee does not require any specific adjudication in view of our decisions rendered for the other grounds on the issue of transfer pricing." 27. As the issue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench ....
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....t inclined to allow relief to the assessee. The proposed adjustment is upheld in view of the available adverse jurisprudence on identical facts. The objection is thus diposed off. Aggrieved, the assessee is in appeal before us on the following grounds :- 8. Lease Rental 8.1. The Learned AO and DRP erred in law and on facts in disallowing Rs. 8,38,64,111 being the lease rent paid in respect of cars treating the same as capital expenditure. 8.2. The Learned AO and DRP erred in law and on facts in disallowing the lease rent paid without taking cognizance of the decision of the Supreme Court in the case of ICDS Ltd. vs. CIT (2013) 350 ITR 527 (SC). 8.3. Strictly without prejudice to the above, the Learned AO and DRP erred in law and on facts in not allowing depreciation on total payment towards lease transactions including interest. 15.1. The ld AR argued that this issue is covered by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd vs CIT reported in (2013) 350 ITR 527 (SC) wherein it was held that :- 'the lessor i.e the assessee is the owner of the vehicles. As the owner, it used the assets in the course ....
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....by the company on moulds. 35. When this issue was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 04.04.2018, passed by the Tribunal in assessee's own case in I.T.A. No. 2489/Kol/2017, for assessment year 2013-14, whereby the issue of depreciation on moulds was discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 36. The ld. DR relied upon the orders of the authorities below. 37. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 04.04.2018. In this order, the Tribunal has inter alia observed as under: "16.2. We have heard the rival submissions. The ld AR stated that the moulds were owned by the assessee and used for the purpose of its business. Further, the moulds were exclusively used in the plastic factory by the job workers / co-makers to whom moulds were given by the assessee to be used in the plastic factory, under its control and su....