TaxTMI 
TaxTMI 
2021 (1) TMI 472
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....s India Private Limited (hereinafter referred to as the Appellant') respectfully craves to prefer an appeal against the order issued by the Assistant Commissioner of Income - tax, Range 14(1)(2), Mumbai [hereinafter referred to as the 'Assessing Officer'] under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ('the Act') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel-I, (hereinafter referred to as the Hon'ble DRP') on the following grounds, each of which are without prejudice to one another. On the facts and in the circumstances of the case and in law, the learned AO/ Additional Commissioner of Income-tax (Transfer Pricing) - 1(3) ('TPO') on fact and in law has: GENERAL 1. erred in assessing the total income at Rs. 88,34,41,810 as against returned income of Rs. 80,04,98,533 computed by the Appellant. TRANSFER PRICING ADJUSTMENTS PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISE ('AE') General 2. erred in making an adjustment of Rs. 4,29,47,493 to the total income of the Appellant under Section 92CA(3) of the Act on account of adjustment in the arm's length price of the intern....
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....g the remand proceedings) as the same was beyond the powers of the learned TPO 11. without prejudice to the above, failed to appreciate that none of the agreements derived from the above search were considered comparable by the Appellant. 12. without prejudice to the above, erred in considering the agreement between HERC products and CCT corporation as comparable agreement without giving cognizance to the validity of the agreement as well as the fact that the complete information about the agreement is not available. Variation of 5% from the arithmetic mean 13. the benefit of proviso to section 920(2) of the Act should be granted to the Appellant, if the transaction payment of royalty is within such range. II. AVAILING OF INFORMATION TECHNOLOGY SERVICES, FINANCE AND TREASURY SUPPORT SERVICES, FINANCIAL AND ACCOUNTING SUPPORT SERVICES AND LEGAL AND ADMINISTRATIVE SUPPORT SERVICES FROM AEs General 14. erred in making an adjustment of Rs. 3,99.95,779 to the total income of the Appellant under Section 92CA(3) of the Act on account of adjustment in the arm's length price of the international transaction of availing of information technology services, finance and treasu....
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.... 61.07,852. 26. erred in not appreciating that interest under section 234C would be applicable only on the returned income as against on assessed income levied by the learned AC. Initiation of penalty proceedings under section 271(1)(c) of the Act 27. erred in initiating the penalty proceedings under section 274 read with section 271 (1)(c) of the Act. The Appellant craves leave to add, alter, amend, delete or withdraw any or all of the grounds of appeal at or before the hearing of the appeal so as to enable the Income tax Appellate Tribunal to decide the appeal according to law." 2. Briefly stated, the assessee company which is engaged in the business of manufacturing and trading of pesticides, agro chemicals & seeds had filed its return of income for A.Y. 2010-11 on 30.09.2010, declaring its total income at Rs. 80,04,09,533/-. The return of income was initially processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. Observing that the assessee company had during the year under consideration entered into international transactions with its Associate Enterprises (for short....
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....eld the application of the approach that was adopted by the lower authorities for benchmarking the transaction of payment of royalty. Accordingly, the DRP upheld the determining of the arm's length price of the royalty transaction by the TPO at Nil. Adverting to the alternative view of the TPO wherein using the CUP method he had considered the royalty paid by an another AE of the assessee, viz. Dow U.K to Dow Netherlands as a comparable transaction and determined the arm's length price of the royalty paid by the assessee to its AE at 5% of its net export sales, and had suggested an alternate adjustment of Rs. 1,37,57,774/- that was to be substituted in case the primary adjustment of taking the arm's length price of the royalty transaction at Nil was vacated by the appellate authorities, the DRP was of the view that as the said observation of the TPO was in conformity with the order passed by the Tribunal in the case of the assessee for A.Y. 2003-04, therefore, no infirmity could be related to the same. Accordingly, on the basis of his aforesaid observations the DRP upheld both the primary and alternate transfer pricing adjustments made by the TPO pertaining to the transaction of pa....
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..../-. 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. For a fair appreciation of the issues under consideration we shall briefly cull out the facts as regards the same, as under: (A). Transfer pricing adjustment as regards the royalty paid by the assessee to its AE : Rs. 4,29,47,493/- : The assessee company had entered into a Process Technology Agreement, dated 23.01.1997 with its AE, viz. Dow AgroSciences, BV (formerly known as "Dow Elanco BV") as per which the assessee was obligated to pay royalty to the aforesaid AE on manufacturing of "Chlorpyrifos" @ 5% and @ 8% of its net domestic sales and export sales, respectively. As stated before us, the aforesaid 'agreement' was approved by the Secretariat of Industrial approval, Ministry of Industry (Government of India) vide its letter dated 17.09.1996. As per the approval the royalty was to be paid by the assessee for a period of 7 years during the period of the 'agreement'. Subsequently, the af....
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....1997, therefore, the aforesaid transaction was considered by the assessee to be at arm's length. Alternatively, the assessee aggregated the transaction of payment of royalty with its other international transactions carried out in the manufacturing segment, for the reason, that such other transactions viz. import of raw material and export of finished goods in the manufacturing segment were closely connected with the transaction of payment of royalty. Adopting TNM method as a basis for a secondary analysis the assessee benchmarked the manufacturing segment, and finding the net margin of the said segment during the year under consideration higher than the net margin of the comparables, the payment of royalty to its AE was claimed as being at arm's length. 10. Observing that the approval that was provided by the RBI did not constitute a valid CUP method since the latter while granting the approval did not take into account the transfer pricing provisions to determine the appropriate rates which could be considered as the arm's length price for the payment of royalty, the TPO rejected the benchmarking of the royalty payment carried out by the assessee by adopting the CUP method. In o....
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....ifos", determined the arm's length price of the royalty paid by the assessee to its AE i.e Dow AgroSciences, BV at 5% of its export sales for the year under consideration. On the basis of his aforesaid alternate working the TPO suggested an alternate transfer pricing adjustment of Rs. 1,37,52,774/-, which however was to be invoked only in case the determination of the arm's length price at Nil was subsequently vacated by the appellate authorities. 11. As observed by us hereinabove, the DRP had upheld the view taken by the TPO both as regards the adoption of the ALP of the royalty paid by the assessee to its AE at Nil, and also, the alternate adjustment of Rs. 1,37,52,774/- that was suggested by him in case the primary adjustment was vacated by the appellate authorities. On a perusal of the order of the DRP, we find that the assessee had in the course of the proceedings submitted 'additional evidence' to substantiate that it had during the year under consideration received technical assistance and guidance from its AE to ensure increased efficiency of its manufacturing process and improvement in the quality of the product. On being confronted with the aforesaid documents, we find t....
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....lty paid by the assessee to its AE at Nil AND (b). the alternate working of the ALP on the basis of an "agreement" between two group concerns of the assessee at Rs. 1,37,52,774/-; and (ii). the transfer pricing adjustment of the royalty transaction @2% of the export sales as was suggested by the TPO in his 'remand report', dated 13.11.2014. 12. We shall now deal with the sustainability of the view arrived at by the TPO/DRP as regards the determination of the ALP of the royalty paid by the assessee to its AE, viz. Dow AgroSciences BV. As observed by us at length hereinabove, the TPO/DRP were of the view that as per the Process Technology Agreement, dated 23rd January, 1997, the assessee was obligated to pay royalty to its AE viz. Dow AgroSciences BV on manufacturing of "Chlorpyrifos" for a period of only 7 years. Lower authorities were of the view that as per Clause 11.1 of the aforesaid "agreement", the assessee after fully meeting all its obligations provided in the agreement would be vested with a fully paid, non-assignable and non-exclusive right for the process utilizing technology received prior to consummation of the same. Further, it was observed by the lower authorities th....
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....er meeting all its obligations under the original "agreement", dated 23.01.1997 would stand vested with a fully paid, non-assignable and non-exclusive right, though without any right to sub-license, and would be entitled to practice, only at the plant, the process utilizing technology that was received prior to the consummation of the said agreement. It was therein further provided that if the licensee i.e the assessee subsequent to consummation of the aforesaid "agreement" wished to receive from the licensor i.e its AE, viz. Dow AgroSciences BV any additional technical information related to the production of product or to use technology received under the aforesaid agreement, it would be required to negotiate a new technology license agreement with the aforesaid licensor. It is the claim of the ld. A.R that the lower authorities had erred in drawing adverse inferences as regards the royalty paid by the assessee to its AE during the year under consideration, for the reason, that they were of the view that as the assessee had not received any new technology from the AE during the year, it was, thus, not obligated to pay any royalty to its AE. Rebutting the aforesaid observations of....
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....ht to sub-license, and would be entitled to practice, only at the plant, the process utilizing technology that was received during the period of the aforesaid original "agreement", dated 23.01.1997, and thus, remained under no obligation to pay any royalty to its AE for use of the aforesaid technology. But then, if the assessee after the consummation of the original "agreement" wished to receive from the licensor i.e the AE any additional technical information related to the production of product or to use technology received under the terms of the said agreement, it was required to negotiate a new technology license "agreement" with the licensor. At the outset, we may herein observe that we are unable to persuade ourselves to subscribe to the construing of Clause 11.1 of the original "agreement" by the DRP. As observed by us hereinabove, if the assessee after the consummation of the original "agreement" wished to receive any additional technical information related to the production of the product or to use the technology received under the said "agreement", then, it was required to negotiate a new technology license "agreement" with the licensor i.e the AE. On a perusal of the 'r....
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....istance from its AE, which had consistently been accepted by the department upto A.Y 2009- 10, therefore, in respect of the same "agreement" the department could not take a contrary stand during the year under consideration and therein assail the very existence of the same. To sum up, it is the claim of the assessee that now when the department had for the period A.Y 2005-06 to A.Y 2009-10 accepted the technical know-how and assistance received by the assessee from its AE, it could not during the year in question i.e A.Y 2010-11 assail the validity of the said "agreement". Admittedly, the aforesaid supplementary royalty "agreement", dated 08th June, 2005 (effective from 01st June, 2004) had been accepted by the department for the period A.Y 2005-06 to A.Y 2009-10. Apropos the rejection of the supplementary royalty "agreement" which remains the same during the year under consideration, we are of the considered view that the department by so doing is trying to approbate and reprobate the same i.e quod approbo no reprobo, which is not permissible. On the basis of our aforesaid observations, we not being able to persuade ourselves to subscribe to the view taken by the TPO/DRP that the ....
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.... dated 25.10.2010] to the file of the lower authorities before whom the proceedings were pending. Also, we find, that the Hon'ble High Court of Bombay in the case of CIT Vs. SI Group India Ltd. (2019) 107 taxmann.com 314 (Bom) and CIT Vs. SGS India Pvt. Ltd. (2015) 94 CCH 338 (Bom), had held, that where the payment made by the assessee to its AE is within the limits prescribed by the Government of India, then, the same can be considered as being at arm's length. In fact, we find that the DRP in the assessee's own case for A.Y 2012-13 by relying on the judgement of the Hon'ble High Court of Bombay in the case of SGS India Pvt. Ltd. (supra) had though accepted that the issue as regards determining of the arm's length price of the royalty transaction was in favour of the assessee, however, only for the purpose of keeping the issue alive it had declined to accept the said claim of the assessee. Also, a similar view had been taken by the Tribunal in the assessee's own case for A.Y. 2004-05 to A.Y 2009-10, and it has been held that the royalty paid by the assessee to its AE having been approved by the Government of India/RBI and being as per the rates prescribed in the Press Note No. 2 (....
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.... Sec. 92C of the Act had determined the ALP of the royalty paid by the assessee to its AE at Nil, the same, on the said count also is liable to be struck down. 16. We shall now deal with the sustainability of the alternate transfer pricing adjustment of Rs. 1,37,52,774/- that was made by the TPO by selecting CUP method and considering an "agreement" entered into between two group companies of the assessee i.e Dow UK King Lynn Plant (Dow, UK) with Dow BV (Dow Netherland), whereby Dow, UK had paid royalty @ 3% of its domestic sales and @ 5% of its export sales for manufacture and sale of "Chlorpyrifos". Adopting the aforesaid comparable, the TPO by considering the royalty @ 5% of the export sales as being at arm's length had suggested an alternate adjustment of Rs. 1,37,52,774/-. As per the TPO, the aforesaid alternate adjustment was to be invoked if the primary adjustment i.e determining of the ALP of royalty paid by the assessee to its AE at nil was deleted by the appellate authorities. As observed by us hereinabove, the DRP had also upheld the determining of the alternate adjustment of the ALP by the TPO. 17. We have deliberated at length on the aforesaid issue and are unable t....
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....ted to the DRP an alternate arm's length price for the royalty paid by the assessee to its AE @ 2% of the export sales. As such, the TPO had proposed an alternate adjustment in the event the determination of the arm's length price by him vide his order passed u/s 92CA(3) did not find favour with the appellate authorities. As observed by us hereinabove, the aforesaid view of the TPO was also approved by the DRP. 19. The ld. A.R had objected to the adoption of the royalty agreement between the aforesaid third parties, viz. AARC Corporation and CCT Corporation for benchmarking of the royalty paid by the assessee to its AE. In order to drive home his claim that the aforesaid "agreement" could not be considered for the purpose of benchmarking, the ld. A.R had drawn our attention to the aforesaid 'agreement', Page 1983 of APB. 20. We have given a thoughtful consideration to the objections raised by the ld. A.R as regards selection of the aforesaid "agreement" for benchmarking the royalty paid by the assessee to its AE and find favour with the same, for the reasons culled out as under : (i) On a perusal of the records, we concur with the ld. A.R that what has been relied and acted upo....
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....ing of the same for benchmarking the royalty paid by the assessee to its AE using CUP method, however, for the sake of completeness we shall deal with the sustainability of the secondary analysis carried out by the assessee following TNM method. As observed by us hereinabove, the assessee had carried out a secondary analysis to ascertain the arm's length price of the royalty paid to its AE by applying the TNM method. As stated by the assessee, since the royalty transaction is clearly linked to the manufacturing activity, it had, therefore, analyzed the same alongwith the manufacturing transaction using a combined transaction approach. As the margin earned by the assesee from the manufacturing activity (after considering the amount of expense on royalty payment) was much higher (19.09%) than the margins earned by the other comparables (10.30%), the margin earned from the manufacturing activity was held to have met the arm's length test. Accordingly, the assessee had concluded that the royalty payment being the operating cost for the manufacturing segment was at arm's length. On a perusal of the orders of the lower authorities, we find that they had accepted the benchmarking analysis....
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....ee from its AEs, viz. information technology services, financial and treasury support services, financial and accounting support services and legal and administrative support services. As observed by us hereinabove, the assessee company had received the aforementioned Intra-Group Services for which its AEs had raised a charge upon it on cost plus mark up basis. Since, the above services rendered by the AEs were used by all the business segments of the assessee company, viz. manufacturing segment, trading segment, indenting segment and technical support services segment, therefore, the cost was allocated by the assessee to all the business segments on a pro rata basis considering the revenue of each segment. As the aforesaid transaction of receipt of Intra-Group Services by the assessee from its AEs was closely connected with the other international transactions carried out with the AEs, the assessee, thus, had aggregated the same and benchmarked the same by applying TNM method for each segment. As the margin of the assessee in each segment was higher than those of the comparables, therefore, the transactions were treated by the assessee as being at arm's length. 24. We have heard ....
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.... shots were general in nature and did not prove the amount of contribution the AEs would have made by rendering the services to the assessee company. Also, it was observed by the DRP that the assessee had not submitted evidence relating to the cost that was incurred by the AEs and the commensurate benefit derived there from on the basis of which it could be held that the payments made by the assessee were found to be at arm's length. Further, the DRP rejected the benchmarking carried out by the assessee by applying the TNM method and upheld the determination of the arm's length price of the intra-group services received by the assessee from its AEs at Nil by the TPO. 26. On a perusal of the orders of the lower authorities and the records before us, we find that it is a matter of fact borne from records that the TPO by calling upon the assessee on 25th January, 2014 (5 days before the time limit) to furnish the details and evidence to support its claim of having received intragroup services from the AEs, had afforded insufficient time for doing the needful. In the backdrop of the aforesaid fact, the assessee in order to substantiate its claim of having received the intra-group serv....
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....by the AEs in the earlier assessment years, i.e A.Y 2006-07, A.Y 2007-08, A.Y 2008-09 and A.Y 2009-10, and the TPO in his orders passed for the said respective years under Sec. 92CA(3) of the Act holding the services to be at arms' length had not made any adjustment as regards the same. It was averred by the ld. A.R that as there was no change in the facts and circumstances of the assessee's case as in comparison to those of the preceding years, therefore, the TPO was not entitled to adopt a contrary view and draw adverse inferences during the year under consideration. It was submitted by the ld. A.R that the AEs of the assessee company had filed their returns of income and had offered the amount received from the assessee company to tax, and the same had been accepted by the department. In fact, it was submitted by the ld. A.R that in case of one of the AE, viz. Dow Chemical Singapore Pte. Ltd., the assessment and transfer pricing order was passed without making any adjustment. On the basis of the aforesaid facts, it was the claim of the ld. A.R that once the department had accepted that the amounts received by the AEs is chargeable to tax as fees for services rendered and had ass....
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....rusal of the "remand report", dated 13.11.2014, we find that the TPO had though accepted that services were received by the assessee from its AEs, but, had observed, that the benefit received from availing of such services had not been substantiated by the assessee company. Adopting a similar view, we find that the DRP in its order had held that though the assessee had received the services from its AEs, but then, the same were general in nature. In the backdrop of the aforesaid facts, we find that it is a matter of an admitted fact borne from records that the assessee had received intra-group services from its AEs during the year under consideration. In our considered view, now when it is an undisputed fact that services were rendered by the AEs to the assessee, it was, then, obligatory on the part of the TPO to have benchmarked the said services by adopting any of the method provided in Sec. 92C of the Act. As per the settled position of law, we are of the considered view that the lower authorities had erred in rejecting the benchmarking analysis of the assessee on the ground that the cost and benefit analysis was not done by the assessee, and it had not shown as to what benefit ....
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.... AEs cannot be sustained and is liable to be struck down. 29. Although, we have struck down the transfer pricing adjustment in respect of the intra-group Services received by the assessee from its AE, however, for the sake of completeness we shall deal with the claim of the assessee that no such adjustment was even otherwise called for on the merits of the case. It is the claim of the assessee that now when the intra-group services received by its group companies in India from the aforementioned AEs had been held to be at arm's length price, therefore, a contrary stand in the case of the assessee could not have been drawn. Although, we are principally in agreement with the aforesaid claim of the assessee, however, in the absence of the relevant details which would reveal rendition of similar services by the AEs to the other group companies in India and the treatment of the same as being at arm's length by the department in the case of the said latter group concerns, we are unable to summarily accepted the said contention on the very face of it. 30. Further, we find that it is the claim of the assessee that as its AEs had filed their returns of income and offered the amount receiv....
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....it Split Method (PSM) are not applicable to the transaction under consideration, therefore, TNM was the only method that could have been applied to benchmark the aforesaid transaction. Our aforesaid view that in case the TPO is not able to bring comparables on record by applying CUP method, then, the TNM method applied by the assessee is to be accepted is supported by the following judicial pronouncements: "(a) Knorr Bremse vs. ACIT (77 taxmann.com 101) (Delhi) (b) AWB India P. Ltd. vs. DCIT (50 taxmann.com 323) (c) Emerson Climate Vs. DCIT (ITA No 2182/Pun/2013) (d) Merck Ltd. Vs. DCIT (69 taxmann.com 45) (e) TNS India Vs. ACIT (48 taxmann.com 128) (f) Schneider Electric India P. Ltd. Vs. DCIT (82 taxmann.com 364) (g) Sabic Innovative Plastic India P. Ltd. Vs. ACIT (88 taxmann.com 810) Apart from that, we are also in agreement with the claim of the assessee that now when the TPO/DRP had accepted the benchmarking carried out by the assessee by applying TNM method insofar other transactions are concerned, therefore, it was not open for them to subject the royalty transaction to a separate analysis. In support of our aforesaid observation that once TNM method is accept....
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.... filed by the assessee with the DRP. In fact, no adverse inference as regards the aforesaid payment made by the assessee company finds any mention in the order of the DRP. In our considered view, as there is no justifiable reason for drawing of any adverse inferences as regards the payments that were made by the assessee to the aforesaid person, we, thus, not being able to persuade ourselves to subscribe to the claim of the ld. D.R that there was no material available on record which would justify the basis of the costs to the AE, reject the same. 34. In the backdrop of our aforesaid deliberations, we herein vacate the transfer pricing adjustment of Rs. 3,99,95,779/- made by the AO/TPO as regards the intra-group services received by the assessee from its aforesaid AEs. The Grounds of appeal No(s).14 to 20 are partly allowed in terms of our aforesaid observations. 35. As regards the Ground of appeal No. 22 pertaining to allowing of short credit of TDS by the A.O, it was submitted by the ld. A.R that as the A.O had now granted the credit for the deficit amount of TDS, therefore, the said ground had been rendered as infructuous. In the backdrop of the aforesaid concession of the ld.....
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....e TPO, without applying its mind and without recording its satisfaction, merely making the entire process of referring the matter to the TPO as invalid. II. PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISE ('AE') General 3. erred in making an adjustment of Rs. 5,90,82,363 to the total income of the Appellant under Section 92CA(3) of the Act on account of downward adjustment in the arm's length price of the international transaction of payment of royalty. Rejection of economic analysis undertaken by the Appellant erred in not considering approvals received from Secretariat of Industrial Assistance (SIA'), Ministry of Industry and Reserve Bank of India (RBI') as valid CUP and rejecting the CUP analysis undertaken by the assessee as a primary analysis. 4. erred in not accepting the economic analysis undertaken by the Appellant including the analysis using the combined Transactional Net Margin Method ('TNMM'), in accordance with the provisions of the Act read with the Income-tax Rules, 1962 (the Rules'), for the determination of the arm's length price of the international transaction of payment of royalty. Disregarding the commercial benefit....
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....royalty paid by Dow UK to Dow Netherlands is taken as CUP, appropriate adjustment should be provided on the same to eliminate the differences. Variation of 5% from the arithmetic mean 16. the benefit of proviso to section 92C(2) of the Act should be granted to the Appellant, if the transaction payment of royalty is within such range. II. PAYMENT TO AE'S FOR AVAILING OF SERVICES General 17. erred in making an adjustment of Rs. 4,56,09,104 to the total income of the Appellant under Section 92CA(3) of the Act on account of downward adjustment in the arm's length price of the international transaction pertaining to availing of services. Rejection of the economic analysis undertaken by the Appellant 18. erred in not accepting the economic analysis undertaken by the Appellant including the analysis using combined TNMM, in accordance with the provisions of the Act read with the Rules, for the determination of the arms length price of the international transaction of payment for availing of services. Inappropriate application of CUP method to benchmark the international transaction 19. erred in not using any of the five method prescribed under section 92C to benchmark....
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....processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 39. Observing that the assessee company had during the year entered into international transactions with its Associate Enterprises (for short "AEs"), the A.O made a reference under Sec. 92CA(1) of the Act to the Addl. CIT, Transfer Pricing Officer-1(2), Mumbai (hereinafter referred to as "TPO") for determining the Arm's Length Price of the said transactions. The TPO vide his order passed under Sec. 92CA(3), dated 22.01.2015 made an adjustment of Rs. 10,46,91,467/- to the ALP of the international transactions of the assessee, as under: Sr. No. Particulars Amount 1. (a). Adjustment to the ALP of royalty paid by the assessee to its AE viz. Dow AgroSciences BV by computing the same at Rs.nil as against the ALP of Rs. 5,90,82,363/- determined by the assessee. Rs. 5,90,82,363/- (b). Alternatively, the TPO by applying CUP method had suggested adjustment of Rs. 2,15,25,030/-/- that was to be invoked only if the primary adjustment of taking the ALP of the royalty transaction at Nil was vacated by the lower authorities. - ....
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....he TPO at Nil. Adverting to the alternative view of the TPO wherein using the CUP method he had considered the royalty paid by an another AE of the assessee, viz. Dow U.K to Dow Netherlands as a comparable transaction, and had determined the arm's length price of the royalty paid by the assessee to its AE at 5% of the net export sales, and suggested an alternate adjustment of Rs. 2,15,25,030/- that was to be substituted in case the primary adjustment of taking the arm's length price of the royalty transaction at Nil was vacated by the appellate authorities, the DRP was of the view that as the said observation of the TPO was in conformity with the order passed by the Tribunal in the case of the assessee for A.Y 2003-04, therefore, no infirmity could be related to the same. Further, the TPO on the basis of the remand proceedings for A.Y 2010-11 had carried out an alternate benchmarking by selecting an "agreement" between two parties, viz. AARC Corporation and CCT corporation (HERC agreement as referred by the TPO) from the Royaltystat database and had suggested a transfer pricing adjustment as regards the royalty transaction @ 2% of the export sales. DRP relying on the order passed b....
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.... order therein passed shall apply mutatis mutandis for the purpose of disposal of the said issue. The Grounds of appeal Nos. 1 to 16 are dispossed off in terms of our aforesaid observations. 45. We shall now advert to the claim of the assessee that the TPO/DRP had erred in making an adjustment of Rs. 4,56,09,104/- as regards the arm's legnth price of the intra-group services that were received by the assessee from its AEs. On a perusal of the orders of the lower authorities, we find that the TPO vide his order passed under Sec. 92CA(3) had accepted that intra-group Services were received by the assessee company from its AEs. However, for determining the arm's length price of the aforesaid transaction he had adopted an ad hoc method and held that 950 hours would have been spent by the AEs for rendering the aforesaid services to the assessee company, and therein, taking a rate of Rs. 3000/- per hour had estimated the arm's length price of the aforesaid Intra Group Services at Rs. 28,50,000/-. 46. On objections filed by the assessee, the DRP observed that the assessee company had received services from its AEs. Although, it was observed by the DRP that considering the facts of the c....
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....ed in terms of our aforesaid observations. IT(TP)A. No.1528/Mum/2017 (Assessment Year: 2012-13) 51. We shall now take up the appeal of the assessee for A.Y. 2012-13. The assessee had assailed the impugned order on the following grounds of appeal before us : "Based on the facts and circumstances of the case, Dow AgroSciences India Private Limited (hereinafter referred to as 'the Appellant') respectfully craves to prefer an appeal against the order issued by the Income Tax Officer, Range 14(1)(3), Mumbai [hereinafter referred to as the Assessing Officer'] under section 143(3) read with section 1440(13) of the Income-tax Act, 1961 ('the Act') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel- I, (hereinafter referred to as the Hon'ble DRP') on the following grounds, each of which are without prejudice to one another. On the facts and in the circumstances of the case and in law, the learned AO/ Additional Commissioner of Income-tax (Transfer Pricing) - 1(2) ('TPO') on fact and in law has: GENERAL 1. Erred in assessing the total income at Rs. 72,85,47,300 as against returned income of Rs. 60,98,52.220 compute....
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....sidering controlled transaction as CUP 10. Erred in comparing the rate of royalty paid by the Appellant to its AE [Dow AgroSciences B.V (Dow Netherlands)], with a controlled transaction i.e. the royalty rate paid by Dow UK, another AE of the Appellant, to Dow Netherlands. 11. Erred in not considering the difference in definition of 'net sales' as per agreement between Appellant and Dow Netherlands and as per agreement between Dow UK and Dow Netherlands 12. Without prejudice to the above, erred in ignoring the fact that prices of the products in UK is significantly different as compared to India, since UK is a developed country and thereby the royalty paid by Dow UK cannot be compared with the royalty paid by the appellant. 13. Without prejudice to the above, erred in ignoring the fact that there exists technological differences between the technology availed by the Appellant and Dow UK (where the technology was old) and hence the same cannot be taken as comparable. 14. Without prejudice to the above, even if controlled rate of royalty paid by Dow UK to Dow Netherlands is taken as CUP, appropriate adjustment should be provided on the same to eliminate the differenc....
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....service is received or benefits have been availed by the Assessee. Ignored evidences submitted for service availed and benefits derived 23. Erred in stating that the services availed by the Assessee are in the nature of shareholder activities/ routine services without appreciating the nature of services availed from AEs and benefits derived by the Assessee therefrom. 24. Erred in not appreciating the evidences submitted to substantiate services received/ benefits derived/ basis of allocation of costs and disregarded the same without giving any cogent reasons. Levy of interest under section 234B of the Act 25. Erred in levying of interest of As. 2,1844,093 under section 234B of the Act. Levy of interest under section 234C of the Act 26. Erred in levying of interest of As. 19,43,855 under section 234C of the Act. Initiation of penalty proceedings under section 271(1)(c) of the Act 27. Erred in initiating the penalty proceedings under section 274 read with section 271 (1)(c) of the Act. The Appellant craves leave to add, alter, amend, delete or withdraw any or all of the grounds of appeal at or before the hearing of the appeal so as to enable the Income tax Appella....
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.... order under Sec. 143(3) r.w.s 144C(1), dated 14.03.2016 and proposed to assess the income of the assessee company at Rs. 72,85,47,300/-. 55. Objecting to the additions proposed by the A.O the assessee carried the matter before the Dispute Resolution Panel-1 (WZ), Mumbai (for short "DRP"). As regards the Transfer Pricing adjustment of Rs. 2,51,41,162/- made by the TPO in respect of the transaction of payment of royalty by the assessee to its AE, viz. Dow AgroSciences BV, Netherland, it was observed by the DRP that the benchmarking of the royalty transaction was a recurring issue over the years. After deliberating on the contentions advanced by the assessee, the DRP was of the view that no infirmity could be related to the determining of the ALP of royalty at nil by the TPO. Further, it was observed by the DRP that the issue of benchmarking of the transaction of payment of royalty by the assessee to its AE had earlier came up before the panel in the assessee's case for the immediately preceding year i.e A.Y. 2011-12 and the transfer pricing adjustment made by the TPO was confirmed. Although it was observed by the DRP that the issue as regards determination of arm's length price of....
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....y preceding year i.e A.Y 2011-12. It was observed by the DRP that the total cost of services by applying CUP was determined by the TPO at Rs. 28,50,000/-. Accordingly, it was noticed by the DRP that the TPO had allowed a deduction of Rs. 28,50,000/- and disallowed the balance amount of Rs. 9,35,53,919/-. Relying on the order of the panel for A.Y 2011-12, the DRP upheld the transfer pricing adjustment made by the TPO as regards the intragroup services received by the assessee from its AEs. 56. After receiving the order passed by the DRP under Sec. 144C(5), dated 13.12.2016, the A.O framed the assessment under Sec. 143(3) r.w.s 144C(13), dated 24.01.2017 and determined the total income of the assessee company at Rs. 72,85,47,300/-. 57. Aggrieved, the assessee has assailed the assessment order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 24.01.2017 in appeal before us. 58. As regards the claim of the assessee that the TPO/DR had erred in benchmarking the transaction of royalty paid by the assessee to its AE viz. Dow AgroSciences BV, Netherland, we find that as the facts and the issue involved in the case before us for the aforementioned year i.e A.Y. 2012-13 remains th....