TaxTMI 
TaxTMI 
2022 (7) TMI 1210
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for MSDW Mauritius and MSIL UK due to Transfer Pricing Adjustment made by the Assessing Officer. 2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 6,24,08,002/- on account of overseas support service received from its AES, MSIL, under the head payment of Overseas Support fees" " 3. On the facts and in the circumstances of the case and in law, the Ld. CITIA) erred in deleting the disallowance of Rs. 53,72,360/- u/s. 40A(2) paid to Sh. Ashith Kampani being remuneration paid in excess of limit prescribed by the Ministry of Law, Justice and Co. Affairs." 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.78,93,438/- under section 14A made by the AO. 5. (i) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 1,72,51,564/- made u/s.40(a)(ia) in respect of Transaction charges, leaseline charges. VSAT charges including WAN & TWS paid to Stock Exchange respectively, without appreciating the facts that these were composite charges for professional an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion made by the learned TPO to the extent of Rs. 102,389,087 on account of the Arm's Length Price (ALP) of brokerage received on trades executed for the Associated Enterprises (AEs), namely, Morgan Stanley Mauritius Company Limited (MS Mauritius) and Morgan Stanley & Co International Limited, United Kingdom (MSIL UK) due to Transfer pricing (TP) adjustment. In this regard, the learned CIT(A) specifically erred on the following grounds: 1.1 By not appreciating the fact that during the Financial Year (FY) 2004-05, MS Mauritius had entered into similar trades with third party brokers also, who had charged brokerage to it at lower rates than the brokerage rates charged by the Appellant in FY 2004-2005, which establishes adherence to the arm's length principle of the trades entered into between the Appellant and the AES. 1.2 In not accepting the Appellant's contention of applying Transactional Net Margin Method (TNMM) on overall basis as the most appropriate method for determining the ALP for trades executed with the AES. 1.3 In not accepting the Appellant's contention that even if the Comparable Uncontrolled Price Method (CUP Method) is applie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned brokerage commission from associate enterprises in Mauritius amounting to Rs. 21,90,69,377/- and UK amounting to Rs. 35,54,824/-. The assessee aggregated all the transactions and adopted Transactional Net Margin Method (TNMM), as the most appropriate method, benchmarked along with other transactions which are not in dispute, submitted that all international transactions are at arms' length price. . 07. Assessee has also made a payment to Morgan Stanley International Inc of overseas support services fees amounting to Rs. 62,408,002/-. This was also benchmarked adopting transactional net margin method as the most appropriate method clubbing it along with other international transactions. Hence, according to assessee it is also at arm's-length. 08. These transactions were tested by the learned Transfer Pricing Officer and found that the commission rate earned from the associate enterprises is less than the commission rate earned from independent parties. The learned Transfer Pricing Officer found that in the immediately preceding year adjustments were made on account of these transactions. Therefore, based on the last year, the learned Transfer Pricing Officer made an adj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rked out at Rs. 33,15,32,868/- against the brokerage charged of Rs. 21,69,55,132/-. Accordingly, assessee was granted marginal relief. Therefore, assessee is aggrieved with the order of the learned CIT(A) by rejection of the contention of the assessee, rejection of TNMM method, adoption of CUP method, not considering adjustment of 50% brokerage and not accepting that if CUP method is applied than overseas and domestic clients both must be considered. 013. With respect to the adjustment on account of overseas support services fees, the learned CIT - A that during the assessment year 2004 - 05 the similar issue of disallowance of expenditure pertaining to overseas support services has been examined by him in detail in the adjustment made by the AO was deleted for the reasons discussed in that order dated 2/12/2010. Accordingly he deleted the adjustment on account of the arm's-length price of the transaction of overseas support services of Rs. 62,408,002/-. 014. The learned Assessing Officer is aggrieved as the learned CIT(A) has granted substantial relief to assessee on transfer pricing issues. The learned Assessing Officer is also aggrieved by deletion of adjustment on account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contentions and perused the orders of the lower authorities. Since, the issue has already been decided by the co-ordinate Bench in assessee's own case for A.Y. 2002-03, which has been followed by co-ordinate Bench in assessee's own case for A.Y. 2004-05, we find no reason to sent the matter back to the file of the learned Transfer Pricing Officer. The co-ordinate Bench has decided the issue as under for A.Y. 2002-03. For that assessment year the TPO granted an adjustment of marketing cost to the extent of 0.1076% and which is approximately 30% of the weighted average rate charged to 3rd party clients. The learned CIT (A) granted adjustment of 40% with respect to marketing cost adjustment for significant volume and research cost and granted relief to the assessee. This action of the learned CIT - A was challenged by the revenue in its appeal as per ground number (vi). Coordinate bench as per paragraph number 29 upheld the order of the learned CIT - A. Thus the adjustment granted by the learned CIT - A as per paragraph number 22 of that order of 40% was upheld. In appeal of the assessee as well as the revenue for assessment year 2004 - 05 this issue is dealt with in paragraph number ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-03 dated 25th February, 2020. He referred to page no.14 of that decision. He further submitted the chart at page no.5 of the chart of issues, wherein it is contested that in clearing house trade, the final adjustment would be rupees Nil and in case of DVP trades, the adjustment would be Rs.9,59,202/-. 025. The learned Departmental Representative submitted that this issue needs verification. 026. We have carefully considered the rival contentions and find that now assessee has submitted the details, wherein the third party rates are charged by the assessee for clearing house trading is 0.25% and adjustment on account of volume marketing etc. at the rate of 50% makes the arms length price of the brokerage at 0.13%. The assessee has charged the brokerage of 0.14% from Mauritius entity and 0.21 % from UK entity. Therefore, final amount of adjustment is in case of clearing house trades. 027. With respect to the delivery versus Payment towards third party rates charged by assessee is 0.38% and after deduction of 50% it comes to 0.19%. Assessee has charged from Mauritius Associated Enterprises 0.14 % and from UK Associated Enterprises of 0.22%, looking to the volume of trade, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rprises has been charged by other brokerage house rates less than what assessee has charged than the rates charged by the assessee should be considered as arm's length price. We have verified the data place at page no. 215, 217 of the Paper Book. We find that in case of 19 transactions, the ICICI brokerage Securities Limited on clearing house transaction has charged 0.1% as commission rate and also 0.05%. There is a difference of almost 3 times between the lowest rates charged and the highest rate charged by the ICICI brokerage Securities Limited. Coming to the Motilal Oswal Securities rate, the identical situation is depicted. In two of the transactions there is a nil rate of commission and in three of the transactions it is at 0.16%. There is no justification for such wide variants in the rates. With respect to the DVP rates, the assessee has only given a single instance where the commission expenditure is merely Rs.15,542/-. No justification is coming from the side of the assessee with respect to such a wide variance in the rates. Further, 40% deduction granted by the ITAT also covers such issue. The reliance on the decision First Credit ITES (P.) Ltd. (supra) also do not apply ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 40A(2) of the Act. The disallowance has been made by the learned Assessing Officer holding remuneration is paid in excess of limits permitted by Ministry of law and justice vide letter dated 24th April, 2001. The learned CIT(A) found that remuneration was paid of Rs.89,17,000/- against the approval limit of 53,72,360/-. He further held that Mr. Ashith Kampani has 18 years of experience in the field of capital market. Identical issue arose in case of assessee for A.Y. 2004-05 where learned CIT(A) deleted the addition which was confirmed by ITAT. In view of this, we find no infirmity in the order of the learned CIT(A) in deleting the disallowance which has been confirmed by ITAT in assessee's own case for earlier years. We also find that the learned Assessing Officer has not given any reason that why the above remuneration is excessive and unreasonable looking to the legitimate needs of the business. Further, the approval granted under the companies Act cannot use for making disallowance under the income tax Act, for the reason that both the enactments have different objects and reasons. Accordingly, ground no. 3 is dismissed. 038. Ground no. 4 is with respect to the deletion of ....