TaxTMI 
TaxTMI 
2021 (11) TMI 401
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....nt of Transfer Pricing ('TP') adjustments under section 92CA(3) of the Income-tax Act, 1961 ('the Act'). Provision of business support services and marketing support services (adjustment of INR 8.99.71.009) 2. On the facts and in law, the Ld. TPO erred in not treating "amortization of goodwill and noncompete fees" as abnormal and non-recurring expenses ought to be excluded while computing the TNMM operating margin earned from provision of services to Associated Enterprises ("AEs), in contravention of provisions of Rule 10B of the Income tax Rules, 1962 (the "Rules"). In this regard, the Ld. TPO and Ld. DRP completely disregarded the facts that - 2.1 Such expenses were completely unrelated to the pricing of international transactions; 2.2 The comparable companies incurred no cost of such or similar nature; 2.3 Appropriate adjustment ought to have been provided under Rule 10B( 1 )(e) of the Rules; and 2.4 Reliance on the Safe Harbour Rules was neither appropriate nor correct. 3. On the facts and in law, Ld. TPO erred in aggregating the international transactions of provision of business support services and provision of m....
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.... be paid by the Appellant for the outstanding receivables during the year 7.3 That the Appellant had significant payables towards its AEs on which the Appellant has not paid any interest to its AEs 7.4 That the issue of outstanding receivables, if any, is subsumed in the working capital adjustment granted to the assessee and no separate adjustment on account of outstanding receivables is called for. 8. On the facts and in law, the Ld. AO erred in not granting full credit of TDS available to the Appellant and further erred in levying interest under section 234B of the Act and arriving at an incorrect demand of INR 10,03,848 instead of refund of INR 17,92,400 due to the Appellant. 9. On the facts and in law, the Ld. AO erred in initiating penalty proceedings u/s 271(1)(c) of the Act." 3. Representatives of both the sides were heard at length. Case records carefully perused and with the assistance of the ld. counsel for the assessee, we have considered the relevant documentary evidences brought on record in the form of paper book, in light of Rule 18(6) of the ITAT Rules. 4. Briefly stated, the facts of the case are that the appellant company ....
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....od Operating profit/Operating Revenue (OP/OR 97049053 ii. Import of medical equipments capitalized OP/OR 20550167 iii. Provision of business and technical support services Operating profit/Operating cost OP/OC 396362471 iv. Receipt of distribution and marketing services OP/OC 145432442 v. Import of consumables for resale 37352066 9. The results as submitted by the taxpayer are as under: Particulars Business Support Services Distribution & Marketing services Operating revenues 393,800,000 184,956,000 Operating costs 357,600,000 7 57,506,000 Operating profit 36,200,000 27,450,000 T OP/OC 10.12% TNMM 17.43 TNMM 10. On the basis of the aforesaid chart, the TPO observed that the assessee has considered business support services and distribution of marketing services as separate segments whereas the nature of services provided by the assessee under these two segments are of similar nature and, accordingly, held that these should be considered as a single segment. 11. The TPO further observed that the assessee has considered 'amortization of goodwill' as non-operati....
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....the say of the ld. counsel for the assessee that the said expenses were identified only for accounting purposes considering that acquisition of different line of products by the assessee had resulted in goodwill and non-compete fees. The ld. counsel for the assessee further stated that such expenses were not incurred as such for the purpose of providing services to its AEs. 16. Referring to the inter-company agreement, the ld. counsel for the assessee pointed out that such expenses were not considered while determining the cost base of the assessee nor such expense influenced the profitability. The ld. counsel for the assessee further drew our attention to the transfer pricing assessment order of subsequent Assessment Years i.e. 2013-14 and 2014-15 and pointed out that in subsequent Assessment Years, neither the Assessing Officer has aggregated the segments nor has considered the amortization of goodwill and non-compete fees as operating expenses. 17. Per contra, the ld. DR was in full support of the findings of the TPO and the DRP and read the relevant findings of the DRP. 18. It is true that the appellant had acquired certain business operations from third party. As a re....
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.... for impairment of assets is not regular business expenditure since it is not recurring in nature and is not related normal business operation and hence not in the nature of operation expenses, therefore, in our considered opinion the same cannot be treated as operating expenditure for the calculation of PLI of the assessee. We accordingly direct the AO / TPO to exclude provision of impairment of assets as operating expenditure. This ground is accordingly allowed." 22. Further, this Tribunal in Ericsson India Ltd ITA No. 168/DEL/2015 has held as under: "Assessee has challenged the findings returned by TPO/DRP treating amortization of goodwill as not extra ordinary in nature. It is the case of the assessee that goodwill is on account of acquisition of units through slump sale under Business Transfer Agreement and in these circumstances, amortization of goodwill is an extra-ordinary item and is not pertaining to the regular operation of the taxpayer, hence non-operating in nature. 16. Ld. AR for the assessee contended that ld. DRP in assessee's own case in AYs 2011-12 and 2012-13 and ld. TPO in AY 2013-14 ITA No.168/Del./2015 has already amortized goodwill as....
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....red by the customer in using these instruments were provided by the assessee. We find that the cost of such analysers imported from the AEs, were capitalized in the books of accounts of the assessee and its related operating cost, i.e. depreciation, has been charged to the profit and loss account while computing the profitability of the trading segment. We find that the assessee has used TNMM analysis to bench mark arm's length nature of international transaction of purchase of medical equipment. 29. We find that the TPO has accepted the purchase price of such analysers for the trading segment as arm's length, but surprisingly, determined the arm's length price of purchase of fixed assets at Nil. The Assessing Officer, while framing the final assessment order, even went ahead one step further and disallowed the claim of depreciation considering the arm's length price determined by the TPO as NIL. 30. The documents referred to by the ld. counsel for the assessee during the course of arguments were considered from which we find that the import of goods was substantiated by furnishing the custom documentation which includes sample invoices along with corresponding bill of entrie....