TaxTMI 
TaxTMI 
2022 (5) TMI 35
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....ding company of the assessee. The assessee deals in Specialist Engineering Services. The assessee undertakes annual maintenance contract of all utility equipment either through the Original Equipment Manufacture or by self-performance. The assessee has a capability to self-perforce Electrical Panel, Transformer, Air Handling, Units, Pumps, Water Treatment Plant, Cooling Tower, Ductable AC Units etc. 3.1. The assessee filed its return of income declaring a loss of Rs. 4,78,16,076/- on 29.11.2013. The case was selected for scrutiny through CASS. Statutory notices alongwith questionnaire were issued which were duly responded by the assessee. The assessee submitted details/documents which were placed on record of the Ld. Assessing Officer ("AO"). The books of accounts of the assessee were called for and examined by the AO on test check basis. 3.2. During the previous year relevant to the assessment year 2013-14 the assessee entered into the following international transactions with its Associated Enterprises ("AEs"):- S. No. Type of International transaction Total value of transaction (Rs.) i. Technical Support Fee 1,86,64,886.39 ii. Intra Group Service-Employee Secondment....
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....cording the following findings:- "3.1 I have considered the TP Order, the assessment order, the TP study of appellant and the submissions of appellant. The appellant has produced detailed agreements, invoices and debit notes towards: -Technical Support Fee -Intra Group Service-Employee Secondment -Intra Group Services-Executive time -Cost Recharges for Expenses-With Mark up With respect to Technical Support Fee, the AR of appellant produced the agreement between EFS India and EMCOR Group which clearly indicates that EMCOR Group granted EFS India, the right to use its Trade Mark and EFS India will pay consideration for using its trade mark. Therefore, out of Rs. 2,74,04,735/- representing expenses of support service charges Rs. 1,67,54,133/- was paid for technical assistance, licensing and marketing fee in respect of technical assistance, brand and central marketing services i.e. fees for using the Trade Mark of EMCOR Group by EFS India. Also, in the instant case, the agreements permitting the EFS India to make use of the trade mark EMCOR Group did not create any asset nor did they confer any right of a permanent nature in favour of the appellant. Hence the expenditure i....
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....id his salary by EMCOR" Article 6 related to the consideration for the seconded employee which EMCOR Group will charge from EFS India: "EMCOR shall, in turn, invoice EFS India (Formerly DIPL) for the secondment of employee at the following rates: Name Title Monthly Compensation (in AED) Ashish Bhatia Finance and Commercial Manager 24,813.00 Para 5 of the article 6 provides that "EFS, India shall be liable to withhold the tax on salary paid to seconded employee in India u/s. 192 of the Income tax Act, 1961 and duly deposit the same with the government of India, on behalf of EMCOR, UAE" 3.3 The appellant has deposited TDS on the salary of the seconded employee and has furnished Form 16 and other relevant documents supporting the same. With respect to Intra Group Services Executive time, based on the documents provided by the appellant, EFS India required a comprehensive range of management skills and other specia....
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....SA Card agencies, the assessee company had to bear the tax liability. Payment of TDS was made in pursuance of the agreement entered in to between the assessee company and the VISA/Master card International. In our opinion payment made as a result of a contractual liability is an allowable expenditure. FAA has rightly placed reliance on the case of Standard Polygraph Machines P. Ltd. (supra) in this regard. Secondly, we find that the same issue has been decided in favour of the assessee by the orders of the Tribunal delivered for earlier AYs. T Bench of the ITAT, Mumbai has decided the issue." 3.6 In the Present case, EFSI has entered into contract with EFSG under which all the taxes will be borne by the EFSI. Therefore, EFSI has duly paid all the TDS liability arising out of the contractual obligation. The Reliance is placed on the above mentioned pronouncement of ITAT Mumbai in case of M/s. Bob Cards Ltd., Mumbai vs. Department Of Income Tax, held that payment made as a result of contractual liability is an allowable expenditure. The same view has been expressed by the High Court of Madras in case of Commissioner of Income-tax v. Standard Polygraph Machines (P.) Ltd. [2002] 124 ....
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.... liability of the assessee. The Ld. DR alleged that the Ld. TPO did not apply his mind to the payment of Rs. 3,11,06,565/- by the assessee to EMCOR Group. 5.2. The Ld. AR assailed the arguments of the Ld. DR. He argued that the Agreements were submitted before the Ld. AO who on perusal thereof noted the nature of services rendered to the assessee by EMCOR Group. Therefore, the allegation of the Ld. DR that the Ld. CIT(A) admitted any evidence without allowing opportunity to the Ld. AO is contrary to the material on record. The Ld. AR pointed out that the impugned addition is over and above the proposed adjustment made by the Ld. TPO which is not in conformity with the provisions of section 92CA(4) of the Act. Not only this the impugned addition comprises of Rs. 34,11,787/- on account of intra group service - Employees Secondment which was proposed by the Ld. TPO for adjustment thereby implying double addition. Hence, the appeal of the Revenue ought to have been restricted to the sum of Rs. 2,76,94,778/- (i.e. Rs. 3,11,06,565 - Rs. 34,11,787). He submitted that the Ld. CIT(A) deleted the impugned addition after applying his mind to all the details and documents which were already o....
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....urselves that the Ld. TPO did not apply his mind to all the international transactions entered into by the assessee with its AEs while making adjustment under section 92C of the Act necessitating the Ld. AO to make additional impugned adjustment of Rs. 3,11,06,565/- by resorting to the provision of section 37(1), section 40(a)(i) and section 40A(2) of the Act. 6.2. We now proceed to deal with argument of the Ld. DR that section 92CA does not debar the Ld. AO to make adjustment over and above what adjustment is proposed by the Ld. TPO, in his assessment order passed after the receipt by him of the Ld. TPO's order under section 92CA(3) of the Act. Let us reproduced the relevant portion of section 92CA, the heading of which is 'Reference to Transfer Pricing Officer':- "92CA. (1) Where any person, being the assessee has entered into the international transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, refer the computation of the arm's length price in relation to the said international transaction under section 92C to the Transfer Pricing Officer. (2) Where a reference is made under sub-section (1), the ....
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....he TPO, the AO shall proceed to compute the total income of the assessee under section 92C(4) in conformity with the ALP as determined by the TPO. This provision is mandatory. By using the expression "shall" no discretion is provided to the AO. He shall have to compute the total income of the assessee in accordance with the ALP as determined by the TPO. In taking this view we are supported by the decision of Delhi Bench of the Tribunal in the case of Tiaujin Tiaushi Biological Development Co. Ltd. vs. DCIT [2015] 37 ITR 260 (Trib.) (Delhi). In this case, it is held that the TPO's order is binding on the AO who has no choice but to pass an order in conformity with the order of the TPO post amendment to section 92CA(4) w.e.f. 1.6.2007. 6.5. Our view is also supported by the CBDT Instruction No. 15/2015 dated 16.10.2015. Para 5 thereof refers. 6.6. The decision of Bangalore Bench of the Tribunal in Herbalife International India (P) Ltd. vs. ACIT (2016) 65 Taxmann.com 143, is also very relevant. In that case during the previous year relevant to assessment year 2008-09 the assessee had paid administrative service fee to its AE. Transaction of payment of administrative service fee ....
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..../- being Technical Support Fee and payment of Rs. 77,76,249/- being Intra Group Services - Executive time amounting in all to Rs. 2,56,09,858/-. The Ld. CIT(A) incorporated the submission of the assessee in his order and recorded his findings which is as under against which the Revenue is in appeal before us:- "2.1 I have carefully considered the arguments of the AR of appellant, the documents produced during appeal proceedings the assessment order and various case laws referred to by the assessing officer and counsel of the appellant. The AR of appellant has produced detailed agreements, invoices and debit notes towards: -Technical Support Fee and -Intra Group Services-Executive time With respect to Technical Support Fee, the appellant relied on the agreement between EFS India and EMCOR Group which clearly indicates that EMCOR Group granted EFS India, the right to use its Trade Mark and EFS India will pay consideration for using its trade mark. Therefore, out of Rs. 2,56,09,858/- representing expenses of support service charges of Rs. 1,78,33,609/- were paid for technical assistance, licensing and marketing fee in respect of technical assistance, brand and central marketin....