TaxTMI 
TaxTMI 
2021 (10) TMI 605
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....taken by the Appellant in accordance with provisions of the Income-tax Act, 1961 'the Act') read with Income-tax Ru les, 1962 ('the Rules') 2. The Hon'ble DRP/AO/TPO erred in making an addition of Rs. 50,53,45,718/to the total income of the Appellant on account of adjustment in the arm's length price CALP') of the international transactions with its Associated Enterprises CAEs'). 3. The Hon'ble DRP / learned AO erred in upholding the transfer pricing adjustment CTP') made by the learned TPO pertaining to the international transactions and further erred in: 3.1 Holding that the international transactions cannot be aggregated with the application of Transactional Net Margin Method ('TNMM') for the transfer pricing analysis without appreciating the fact that the principle of aggregation of closely linked transactions is a well-established rule prescribed by the Organization for Economic Co-Operation and Development guidelines (OECD Guidelines') and referred to for guidance in various rulings of Income Tax Appellate Tribunals (ITAT); and 3.2 Concluding that the international transactions form a separate class of tr....
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....s. 6,26,62,000 for the use of trademark of the AE and thereby erred in determining the ALP for the payment of sub-license fee as 'NIL'. 6.4. The Hon'ble DRP / learned AO / learned TPO erred in not appreciating the evidence filed by the Appellant to demonstrate the benefits received by it from the use of trademark of the AE. 6.5. The Hon'ble DRP / learned AO / learned TPO erred in disregarding the external Comparable Uncontrolled Transaction ('CUT') search performed by the Appellant to justify the ALP of the international transaction pertaining to the payment of sub-license fee without giving any cogent reasons. 6.6. The Hon'ble DRP / learned AO / learned TPO erred in not following the Hon'ble ITAT ruling on sublicense fee whereby Hon'ble ITAT in the order for AY 2009-10 held that rejecting the entire payment of sublicense fee without there being any analysis on the CUP method cannot be accepted. However the Hon'ble DRP / learned AO / learned TPO did not give cognizance to such observations made by the ITAT. 7. Payment of procurement services fee amounting to INR 1,77,79,817 /- 7.1. The Hon'ble ....
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....erest in the Appellant. 8.4. The Hon'ble DRP 1 learned Aa erred in upholding the contention of the learned TPO that there was no tangible benefit and no corresponding economic or commercial value was derived by the Appellant from paying the consultancy fee in connection with construction of a new manufacturing 'Facility to the AE and thereby erred in determining the ALP for the payment of consultancy fee as 'NIL'. 8.5. The Hon'ble DRP 1 learned Aa 1 learned TPO erred in disregarding the evidences submitted by the Appellant to prove that 'it was in need of services, services were actually rendered and the benefit was derived from the consultancy services obtained from the AE. 8.6. The Hon'ble DRP failed to take cognizance of the fact that the payment of consultancy fee was associated with construction of a new manufacturing facility and not an extension of the technical know-how and research and other service fee paid, for which no separate charge was warranted. 8.7. The learned TPO/AO further erred in not following the directions issued by the Hon'ble Dispute Resolution Panel whereby DRP had directed AO/TPO may exa....
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....17/-, consultancy service fee involving a sum of Rs. 42,10,94,000/- and payment of consultancy fee for using EASY supply portal of Rs. 38,10,000/-; respectively. 4. We next note with the able assistance coming from both the parties that the assessee's first and foremost argument in principle is qua aggregation of the foregoing transactions followed by adoption of the transactional net margin method (TNMM) as the most appropriate method "MAM"; which in turn, stands declined in the learned lower authorities' respective orders by taking comparable uncontrolled price "CUP" method. It further transpires from a perusal of the case file that neither of the foregoing twin issues require any detailed adjudication as well since we are dealing with consequential second round of remand proceedings wherein the learned co-ordinate bench's order dt.17.04.2015 in assessee's appeal itself had rejected the Revenue's corresponding arguments as under : " Transfer Pricing Issues: 7. Assessee being a wholly owned subsidiary of a foreign company, has various transactions with its AEs which were reported as the international transactions in 3CEB report. The TPO noted them in Page 2 of....
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....8-2000 for getting technical know-how for a period of three calendar years from that effect date. As per renewal of clause at 12.2 it is mentioned that agreement was automatically be renewed subject to Government/Statutory approval for a period of one calendar year at a time in support of the transaction. Assessee has furnished a copy of agreement dt.06-06-2007 effective from 01-01-2007 for payment of royalty @ 2% on sales made to outside parties and 1% on sale to group companies. Even though assessee justified the payment, Ld.TPO however, considered that there is no addition of new technical know-how and compared with financial results of Sri Vishnu Cements Ltd., under the CUP method, to hold that there is no justification for payment of royalty. Accordingly he came to the conclusion that there is no need to pay any amount. Not only that, he also compared some external comparables and came to the conclusion that average pay out on account of technical services by those comparable companies was at 0.91% of net sales. Therefore, based on these two internal and external CUP analysis, TPO determined the payable royalty at 0.91% which comes to Rs. 10.87 Crores. The additional amount of....
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....e above amounts were disallowed. Another disallowance made by the AO was with reference to reimbursement of expenses under various heads totaling to Rs. 51,72,995/-. Thus, in all, an amount of Rs. 99,64,85,214/- was treated as adjustment u/s. 92CA. Assessee filed various objections before the DRP but more or less concurred with TPO vide its order dt.25- 11-2013. Assessee is aggrieved. 10. Assessee's objections are multi-fold. Ground No.1 & 2 are general in nature. Ground No.3 & 4, is the method adopted by the TPO and Ground No.5 to 12 are on various disallowances made by the TPO out of various payments made to AE. Each ground has sub grounds which are more or less in the form of submissions. 11. Ld.AR submitted that TPO erred in rejecting the transfer pricing documentation as well as TNMM as most appropriate method. It was the objection that there is no publicly available information on prices charged in independent transactions which are similar or identical in nature that reflects the characteristics of the services provided by the AEs to the assessee. It was further submitted that neither assessee nor AEs provide similar services under comparable circumstan....
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....se in customer base in the five years and furnished the copies of evidences furnished to the TPO, in support of the submissions. It was further submitted that a publicly available information analysis was undertaken by assessee on the rate of royalty being charged by licensor to a licensee and that analysis came to the range of 1.93%. Therefore, the payment made by ZCL @ 1% on sale was to be considered as arm's length and TPO's determination at NIL cannot be supported, in view of the decision of the Hon'ble High Court of Delhi in the case of CIT Vs. EKL Appliances Ltd., 11.1 Coming to the alleged transfer of economic value of Zuari trade mark to Italcementi Group trade mark, it was contended that there was no migration of economic value as the Zuari brand was owned by the company and is being used in all the sales. It was further contended that AE has not used 'Zuari' brand anywhere in the world for its operations to get any benefit as alleged by the TPO. Further, it was contended that Italcementi Group trade mark was being used from AY.2006-07 onwards and therefore, AO was wrong in taking the market expenses after that period also. With reference to th....
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....omparison on transactions of assessee subsidiary company much prior to the year under consideration cannot be justified. Therefore, on that basis itself, the comparison cannot be considered as an internal CUP. Moreover, the need for not charging royalty from SVCL was also explained as the subsidiary company was a sick company and in the process of reviving the company, assessee has not charged any royalty to its subsidiary company. Therefore, on FAR analysis, SVSL's past record with that of present transactions of assessee-company is not correct. Then, coming to external comparables, we were surprised to note that the TPO considered the technical fee payments without analyzing the nature of the payments. In some cases, it is royalty for acquiring the lime stone from Govt., which is not a 'royalty' for getting the technology from foreign AE. There is foreign exchange expenditure also considered as 'technical knowhow fee'. A detailed objections of the assessee were not even considered or discussed either by the TPO or by the DRP. Therefore, on the basis of an external CUP ALP of 0.91% itself is not correct. Therefore, the entire exercise undertaken by the TPO on t....
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.... on the TP issues are therefore set aside and the entire issue on TP analysis is restored to the file of AO for fresh consideration. The grounds raised are accordingly allowed for statistical purposes." 5. The Revenue vehemently contended that the learned lower authorities have rightly adopted a direct method i.e., CUP which carries precedence over all other indirect methods; including TNMM, as per Serdia Pharmaceutical India Pvt. Ltd Vs. ACIT (2011) 44 SOT 391 (Mum). We find no reason to accept the Revenue's instant argument more particularly in view of the fact that this is second round of consequential proceedings wherein the earlier learned co-ordinate bench had already rejected the very contentions seeking to decline both aggregation as well as TNMM; as the case may be (supra). 6. The Revenue's next vehement contention before us is that the assessee had not even furnished the relevant details having adopted aggregation as well as TNMM method in the consequential proceedings. We find no substance in the Revenue's instant last argument as well since this is once again a second round of assessment wherein no such objections had been put forth from the departmental side in t....