AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1322
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....f additional ground is adjudicated, the other grounds relating to TP adjustment becomes academic. The additional ground raised reads as follow:- "Ground 8 - That in the facts and circumstances of the case, having regard to the similarity of functions performed, assets employed, and risks assumed by the Appellant in rendering the services to its Associated Enterprises (AEs) situated in the United Kingdom (UK) and in countries other than in the UK, the arm's length price agreed between the Competent Authorities of UK and India in the Mutual Agreement Procedure invoked under the India-UK DTAA, ought to be applied to the transactions entered into by the Appellant with its AEs situated in countries other than in the UK." 2.1 The issue raised in the additional ground is on account of subsequent Mutual Agreement Procedure (MAP) resolution. The additional ground raised goes to the root of the issue, hence the same is admitted and we proceed to adjudicate the same. 3. The brief facts relating to the TP adjustment issue are as follows: The assessee is a private limited company, engaged in the business of providing business process services and IT services to its Associated Enterprises ....
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....ITAT Bangalore Bench on account of functional dissimilarity and turnover filter. It was submitted that subsequent to exclusion, only four companies would be remaining in the final list of comparables, which are as follows:- (i) Aditya Birla Minacs Worldwide Ltd (ii) Microland Ltd. (iii) Allsec Technologies Ltd. (iv) Informed Technologies Ltd. 3.2.2 It was submitted that the arithmetical mean of working capital adjustment margins of the above companies would fall below the assessee's NCP margin for provision of ITE services. Consequently, the international transaction of provision of ITE services by the assessee to its AE can be concluded as being at arm's length. 3.2.3 Alternatively, the learned AR by placing reliance on the addition ground No.8 submitted that during the pendency of appeal before the Tribunal, the assessee had filed application under Article 27 of the Indo-UK Double Taxation Agreement (DTA) for initiation of Mutual Agreement Procedure (MAP) between India and United Kingdom (UK) Competent Authorities with respect to provision of SWD services and ITE services provided to the AEs based in UK. It was submitted that as the assessee has accepted the terms of MA....
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....s almost 83% of the total revenue). This proposition finds support in the order of the ITAT Mumbai Bench in the case of J.P.Morgan Services Pvt. Ltd. v. DCIT (supra), which has been followed by the Co-ordinate Bench of the Bangalore Tribunal in the case of CGI Information Systems & Management Consultants Pvt. Ltd. v. DCIT (supra). In this regard, the relevant paragraph No.3.6 of the order in the case of J.P.Morgan Services Pvt. Ltd. v. DCIT is reproduced below:- "3.6 We have gone through the arguments made by both the sides and also the material placed before us for our consideration. It is noted that letter dated 9th April 2015 in Fno.480/13/2010-FTD-1 has been issued in the case of the assessee company under MAP proceedings for A.Y.2006-07 to 2010-111 by the DCIT(OSD), APA-I on behalf of the Foreign Tax and Tax Research Division -I, Central Board of Direct Taxes, New Delhi wherein it has been confirmed that for A.Y.2006-07, for US related transactions, the margin has been determined at 14.38% as against margin of 21.58%, as was determined by the Transfer pricing officer (TPO). It has been further clarified by way of note in the said letter that apportionment between 'US' and 'n....
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.... was stated that since these are recoveries and not expenses claimed, the A.O. may be directed to delete the disallowance. It was further stated that the details are on record at pages 578 to 592, 774 to 775 and 806 to 812 of the paper book. Therefore, the conclusion of the A.O. that no details are available on record is factually incorrect. 4.2 We have heard rival submissions and perused the material on record. The DRP vide its order dated 12.12.2013 had directed the Assessing Officer to verify whether the claim of the assessee that the above mentioned sum represents reimbursement of expenses received by the assessee-company from its AEs towards expat salary paid. Pursuant to DRP's directions, the A.O. decided the issue against the assessee by holding that the assessee has not placed any material on record to show its reimbursement of expenditure towards expat salary. Further the A.O. mentioned that as per provisions of section 144C(13) of the I.T.Act, no further opportunity can be allowed to the assessee. The assessee has very elaborately detailed the nature of reimbursement expenses (refer pages 578 to 592 of the paper book filed by the assessee). The assessee has also furnishe....
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....'s own case for assessment year 2008-2009 and 2010-2011 has allowed the claim of the assessee in its entirety (For A.Y. 2008-2009, the order of ITA in MP No.145/Bang/2016 dated 28.04.2017 and for A.Y. 2010-2011 in IT(TP)A No.191/Bang/2015 dated 25.01.2017). 5.4 The learned Departmental Representative supported the orders of the Income Tax Authorities. 5.5 We have heard rival submissions and perused the material on record. An identical issue was considered by the Bangalore Bench of the Tribunal in assessee's own case for assessment year 2010-2011 (supra). In the case considered by the Tribunal for assessment year 2010-2011, the A.O. had disallowed vehicle lease rentals on the ground that payments were made towards purchase of vehicles. The DRP for assessment year 2010-2011 allowed interest portion of the lease rentals and disallowed principal portion. Both the Revenue as well as assessee had challenged the directions of the DRP on the said issue. The Tribunal, allowed assessee's appeal and dismissed the Revenue's appeal. The relevant finding of the Tribunal in assessee's own case for assessment year 2010-2011(supra), reads as follows:- "20. We have considered the rival submissio....
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....assessee company incurred an expenditure for the personal use of the directors i.e., even if there was any personal use by the directors, the same was as per the terms and conditions of service and insofar as the assessee-company was concerned it was a business expenditure and not disallowable as such. 9.1. There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company is a distinct assessable entity as per definition of "person" under s. 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, "even if they are personally used by the directors" the vehicles are personally used by the company, because a limited company by its very nature cannot have any 'personal use'. The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of s. 40(c) and s. 40A(5) of the Act. 9.2. It is pertinent to note that except for the assessment year in question, for no other assessment year the expenditure in question has been disallowed. We see no reason for the Tribunal to take a different vi....
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....ccasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Full Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the IT Act itself." We are in respectful agreement with the aforesaid view. 10. In the circumstances, in our opinion, the Tribunal was wrong while disallowing 1/6th of the total car expenditure and depreciation claimed by the assessee on the ....
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.... Direct Taxes (CBDT) has opined that the aforesaid accounting standard issued by ICAI creating distinction between finance lease and operating lease will have no implications under the provisions of the Act. The relevant excerpt of the said Circular are reproduced herein below:- "Under the Income-tax Act, in all leasing transactions, the owner of the asset is entitled to the depreciation if the same is used in the business, under section 32 of the Income-tax. The ownership of the asset is determined by the terms of the contract between the lessor and the lessee. . . . . . . . . It has come to the notice of the Board that the New Accounting Standard on 'Leases' issued by the Institute of Chartered Accountants of India require capitalization of the asset by the lessees in financial lease transaction. By itself, the accounting standard will have no implication on the allowance of depreciation on assets under the Act." 5.4 Thus, the CBDT's view on the treatment of finance lease is not aligned to the accountant's perspective of a finance lease. For accounting purposes, although the lessee shows the asset in his balance sheet, charges depreciation in accounts ....
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....ys Vs. Union of India (supra). Following the decision of Hon'ble Gujarat High Court as well as Hon'ble Supreme Court (supra), we decide this issue in favour of the assessee and accordingly allow the claim of the assessee regarding lease rentals as an allowable revenue expenditure. It covers both the grounds of the assessee as well as revenue's appeal. Consequently the Ground No.2 of the revenue's appeal is dismissed and Ground II of the assessee's appeal is allowed." 5.5.1 In view of the order of the Tribunal in assessee's own case for assessment year 2010-2011, which is identical to the facts of the instant case, we allow ground No.2 raised by the assessee. Ground No.3 : Liabilities no longer required written back: 6. It was submitted that any enhancement of income would be eligible for deduction u/s 10A of the I.T.Act. In this context reliance is placed on the judgment of the Hon'ble jurisdictional High Court in the case of CIT & Anr. v. Mpact Technologies Services Pvt.Ltd. (judgment dated 11.07.2018) passed in ITA No.228/2013. It was further contended by the learned AR by placing reliance on the judgment of the Hon'ble jurisdictional High Court in the case of CI....