TaxTMI 
TaxTMI 
2021 (2) TMI 357
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....submissions and evidences adduced, in the correct perspective. Thus in the circumstances the addition of Rs. 17,63,722/- deserves to be deleted. 1.1 That the ld. AO as well as Hon'ble DRP erred in making TP adjustments, without appreciating the contention of assessee that not only the educational qualification but also the length of service as well as dedication and relationship with the organization deserves to be considered while ascertaining the arm's length price in respect of salaries paid to AEs. Appellant prays that addition made without appreciating such important aspects, being unjustified, deserves to be deleted. 2. On facts and in circumstances of the case ld. AO has grossly erred in disallowing Rs. 16,100/- out of Director's Travelling expenses arbitrarily without considering the submissions made. Assessee prays such addition being unwarranted deserve to be deleted." 2. During the course of hearing, the ld. AR submitted that appellant is a private limited company incorporated in 2009 and is running an institute offering coaching for preparation of JEE (Main & Advanced) education in Kota, Rajasthan. Over a period of time, institute has evolved as one....
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....ause (b) of sub-section (2) of section 40A 6. Coming to the facts of the case, it was submitted that during the year under consideration, assessee has paid salary/Remuneration to certain related parties (wives of directors of assesse company), which inter alia included: Sl No. Name of AE Nature of Payment Amount Return of Income at APB 1. Shubha Gupta Salary 6,96,600/- 67-69 2. Soneesha Jain Salary 6,96,600/- 70-74 3. MeenaKanwar Salary 6,96,600/- 75-78 4. Anjali Jaiswal Salary 6,96,600/- 79-82 5. RachnaSethia Salary 6,96,600/- 83-86 6. PritiAwasthi Salary 6,96,600/- 87-90 7. Shikha Sharma Salary 6,96,600/- 91-94 48,76,200/- 7. In order to determine Arm's length price, show cause notice was issued by TPO to assessee to furnish comparable cases to benchmark the salary paid by assesse to above related parties. It was submitted that the assessee has applied Comparable Uncontrolled Price (CUP) method for benchmarking Salary paid to these related parties. However, ld. TPO brushed aside submission made by assesse and re c....
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....according to the interest of their wards and sharing performance evaluation -Ensuring motivated staff and uniformity in objectives 3 years Shubha Gupta BSc., Diploma in Computer Applications 6,96,600/- Supervising computer related matters 3 years 8. It is pertinent to note here that ld. TPO has termed such employees as "comparables available within the organization" by grossly ignoring the fact that such employees were:- - holding different education qualification than that of AEs / related parties: - having different job profiles, - employed with assessee company for shorter duration comparatively, 9. And last but not the least related parties being wives of directors had objectives beyond monetary rewards, which ensures higher productivity. Also, by virtue of experience and qualification, all the related parties are not only discharging their respective responsibilities in a very efficient and economic manner but also always ready to shoulder and in fact shouldering additional responsibilities, thereby enabling the institute to achieve greater and greater heights besides fulfilling the objects for which it was created. Moreover, ....
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....of DRP that details of duration/experience/ increase in salary of Prashant Varma furnished before DRP were not in consonance with TP Study Report (page 4 para 2.4.5 DRP order) it is submitted that details were not part of TP Study Report, rather were part of staff salary details furnished before DRP. Kind attention of your goodself is invited which shows staff salary details, it is apparent that all the details of salary paid to Shri Prashant Varma in different years are exactly same as mentioned in written submission filed before DRP. There was merely a mistake in percentage calculation of increase in salary over preceding years, which was a human error occurred while calculating the percentage in our case, and not at all any deliberate attempt to give incorrect data. It is therefore prayed that adverse inference drawn by DRP for this reason is contrary to the facts of the case. 12. It is further submitted that the payment of salary to related parties is made in accordance to the legitimate business needs of the assessee and efforts put in by them and it is well settled law that benefit derived or accrued to the assessee from the goods, services or facilities are to be judged f....
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....d proposed adjustment of Rs. 17,63,272/-. 2.4.3 The assessee has submitted that the all the related persons (Director's wives) of the Directors have 3 years of service till 1st of April, 2014, whereas some of the employees considered by the TPO have lesser duration of service. The comparative data of duration of service of the six person given by the assessee is as under:- Employees name Duration of service till 1st April 2014 Directors Wives Name Duration of Service till 1st April 2014 Mr Gaurav Jain 7 months Mrs Priti Avasthi 3 years Mr Neeraj Sharma 1.5 Years Mrs Anjali Jaiswal 3 years Mr Nikhil Bajpai 1 Year Mrs Soneesha Jain 3 years Mr Prashant Varma 4 Years Mrs Shikha Sharma 3 years Mr Satya Prakash Gupta 1.75 Years Mrs Rachna Sethia 3 years Mr Yashwant Sharma 5 Years Mrs Meena Kanwar 3 years However, as per transfer pricing study filed by the assessee along with its submissions dated 09.02.2018, during the proceedings before the TPO, the data about service duration of the above mentioned employees is as under:- Name Duration of Service till 1^st April, 2014 ....
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.... 2.4.6 Furthermore, the TPO in his order has clearly given finding that the unrelated persons were having better educational qualifications and their educational qualification was relevant to the business of the assessee, but the qualification of the related persons in drawing & painting, philosophy, history was not all the relevant to the business of assessee for which higher salary was paid to them. The TPO/AO has clearly given cogent reasons for his findings regarding his non-acceptance of higher salary paid to the related persons and necessity of application of internal CUP method for benchmarking salary paid to the related persons (wives of the Directors). 2.4.7 In view of the above observations, we are not inclined to interfere with the proposed TP adjustment. The action of the AO/TPO is upheld." 15. We have heard the rival contentions and perused the material available on record. The limited issue under consideration relates to comparable cases selected by the TPO for the purposes of determining the arm's length price of the transactions entered into by the assessee company in terms of payment of remuneration to the related persons while applying the CUP meth....