TaxTMI 
TaxTMI 
2022 (9) TMI 288
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....aggregating the international transactions under one entity level TNMM adopted by the TPO is not correct without adjudicating the ground number 3.1 preferred by the assessee and without understanding the business model of the assessee that the international transaction of provision of ITES to AES (Rs. 1108.86 Crores) and the international transaction of receipt of marketing support services from AES (Rs.16.64 Lakhs) are closely linked as ITES provided by the assessee to the AES has been simply marketed by the AES and hence aggregating the transaction under one entity level TNMM is most appropriate under the facts and circumstances of the case? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in holding that the foreign AES have to be taken as the tested party for the paltry marketing support services rendered by the AES to the assessee without understanding that it is closely linked with the huge ITES provided by the assessee to the AES and that the assessee in its TPSR treated itself as the tested party for the provision of ITES.? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in ....
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....erve international Ltd, though the assessee has not raised any objection before the TPO on their inclusion and observing in his order" I find that there is no discussion by Transfer Pricing on any objection of appellant and yet without remanding the case to the TPO which is violation of Rule 46A? 9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) having rightly held CUP is not most appropriate method for benchmarking the marketing support services provided by the AE WNS capital investment itd, is correct in directing the TPO to treat it as tested party instead of assessee, in spite of the finding in para 13.1 of his predecessor's order for AY 2009-10 relied upon by him that the AE primarily undertakes marketing activities for the assessee which is providing the BPO services for which the AE identifies the customers, contracts with these customers and sub-contracts the work to the assessee, clearly denoting the closely linked nature of the transactions of provision of ITES by the assessee and provision of marketing support services by AE, thereby clearly intending that entity level TNMM is most appropriate.? 10. On the facts and in....
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.... ground that, the learned TPO has erred in considering the following companies which are functionally different as comparable to the Respondent, for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party a. Infosys BPO Limited b. BNR Udyog Limited c. HOV Services Limited 4. erred in not adjudicating on the ground that, the learned TPO has erred in considering the following companies having significant related party transactions as comparable to the Respondent, for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party d. BNR Udyog Limited e. HOV Services Limited 5. erred in rejecting the ground that, the learned TPO erred in considering "TCS e-serve Limited as comparable for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party without appreciating the fact that the company is functionally different, earns super normal profits and has an exceptional year of operatio....
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....ry assistance and workflow business unit) and WNS customer solutions North America incorporation (marketics unit) 9. With respect to the first set of transactions, associated enterprise undertake marketing activities to market the services provided by the group, identify customers in that jurisdiction, contract with such customers and subcontract the entire servicing of the contract to assessee. Associated enterprise enters into contracts with the clients and passes on the work to the assessee. These associated enterprises carry out the function of providing marketing and support services to the assessee. They carry out limited functions. All other risks and rewards under that contract are with the assessee. Assessee is responsible to undertake all duties, obligations, liabilities, and risk under such customer contracts. Therefore, in such contracts, assessee bears all the risks and rewards associated with these transactions and the associated enterprises assumes limited risk. The remuneration of associated enterprise is 10% markup on cost for the costs incurred by them in connection with the marketing activities with respect to all other entities except WNS capital investment L....
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..... The international transactions of the assessee were referred to the Addl. Commissioner of Income Tax, transfer pricing (11)(6), Mumbai (the learned TPO) under Section 92CA(1) for determination of arm's length price. 13. The learned transfer pricing officer disregarded the benchmarking of the appellant , he held that with the first set of transaction stating that foreign AE cannot be taken as a tested party as Revenue has consistently over the past years having not accepted the stand of the assessee of benchmarking its international transactions using foreign Associated Enterprises as a tested parties. SO he aggregated all the transactions entered into by the appellant and benchmarked the entity level margin of the appellant with that of the third-party comparables engaged in provision of IT enabled services. He applied the Transactional Net Margin Method considering the assessee as the tested party for determination of its Arms Length Price of international transaction. The Transfer Pricing Officer was further noted that for A.Y. 2008-09, the Dispute Resolution Panel has also accepted the assessee as tested party. Accordingly, the learned Transfer Pricing Officer selected 15 c....
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....units before allowing deduction under Section 10A of the Act. Accordingly, he computed the deduction under Section 10A of the Act at Rs. 182,46,66,705/- allowable to the assessee. 15. Accordingly, the assessment order under Section 143(3) of the Act read with Section 144C (3) of the Act was passed on 27th May, 2014, Computing total income of the assessee was computed at Rs. 97,43,04,279/-. Wherein; i. The depreciation on intangible of Rs. 81,52,282/- was disallowed. ii. Transfer Pricing Officer under Section 92CA(3) of the Act of Rs. 78,60,61,239/-was made and iii. further the deduction under Section 10A of the Act was allowed of Rs. 182,46,66,706/-. 16. Assessee aggrieved with the order of the learned Assessing Officer preferred the appeal before the learned CIT(A). The learned CIT(A) i. with respect to the first set of international transaction of provision of ITeS services, following his earlier years decision directed the learned Assessing Officer to consider the foreign Associated Enterprises as tested party. ii. With respect to the second set of services of provision of ITeS services directed the learned Assessing Officer to ....
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....icing adjustment in case of assessee. We find that with respect to the first set of transaction of provision of ITeS services where the assessee has adopted foreign AE as a tested party, same has been accepted by the coordinate bench in case of the assessee for assessment year 2004 - 05 to assessment year 2009 - 10. In those orders the coordinate bench also held that both the set of transactions of provision of ITeS services should not be aggregated but should be benchmarked separately. The issue is squarely covered in favour of the assessee by the decision of the coordinate benches in case of assessee itself for [1] assessment year 2004 - 05 in ITA number 1886/ M/2009, [2] for assessment year 2005 - 06 in ITA number 631 - 2011, miscellaneous application 261 - 2019, [3] for assessment year 2007 - 08 in ITA number 1451 /2012, [4] for assessment year 2008 - 09 in ITA number 7378/ 2012, [5] for assessment year 2009 - 10 in ITA number 1410/2017, [6] in assessment year 2011 - 12 and 2012 - 13 in ITA number 2257/2017 and 1955/2016 has accepted the identical claim of the assessee. 21. Further, assessee has entered into advance transfer pricing agreement for FYs 2013-14 to 2017-18 where....
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....ays. Thus, there was change in the entire shareholding of the assessee. At the time of change in shareholding, there were three unit of the assessee which were eligible for deduction under Section 10A of the Act. However, only in one Unit - Pune Unit no.2, which was established in 2002-03 there was a profit of Rs. 11,89,92,131/- on which deduction under Section 10A of the Act was claimed for A.Y. 2010-11. The learned Assessing Officer invoked the provision of Section 10A(9) of the Act and held that due to change in the shareholding the assessee is not entitled to the deduction. The learned CIT(A) allowed the same following his own order for earlier years. We find that the identical issue arose in case of the assessee for A.Y. 2009-10, wherein the co-ordinate bench allowed the claim of the assessee vide order dated 18th June, 2021. Further, for A.Y. 2011-12 and 2012-13, the co-ordinate Bench allowed the claim of the assessee vide order dated 19th March, 2020. In earlier years also, the claim of the assessee was allowed by the ITAT on identical facts. There is no change in the facts and circumstances of the case and therefore, respectfully following the orders of the co-ordinate benc....
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....gible undertaking the deduction is allowable on the whole of such profit irrespective of the fact that in another eligible unit assessee has incurred the losses. Thus for the purpose of claiming deduction u/s 10 A of the act only profits of eligible undertaking is required to be allowed as a deduction without setting of of the losses of another eligible undertaking. The assessee has also stated that this issue is squarely covered in favour of the assessee by the coordinate bench decision for assessment year 2004 - 05, 2005 - 06 and 2008 - 09 as well as for assessment year 2011 - 12 and 2012 - 13. Thus, the issue is decided in favour of the assessee by the coordinate benches in assessee's own case. Further honourable Supreme Court in Commissioner of Income-tax vs YokogawaIndiaLtd.* [2017] 77 taxmann.com 41 (SC) held that From a reading of the relevant provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and res....
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....actions entered into by the Appellant during the subject AY and accordingly, the draft assessment order is void ab initio and the final assessment order dated 23 October 2019 (received on 13 November 2019) passed in the case of the Appellant is time barred; Transfer Pricing Grounds 3. erred in not providing adequate opportunity of being heard to the Assessee prior to incorporating a disallowance of depreciation of Rs 18,13,34,581 in his order passed for the year under consideration. Therefore, the learned Hon'ble DRP/ learned TPO has violated the principles of natural justice and the impugned order passed by the learned Hon'ble DRP/ learned TPO should be quashed. 4. erred in incorporating a disallowance of depreciation in his order passed for the year under consideration based on an adjustment proposed to the value of business and commercial rights purchased by the Assessee from its associated enterprise in AY 2011-12, which has been capitalized in the books of accounts of the Assessee. 5. erred in proposing a disallowance of depreciation in his order passed for the year under consideration which is a consequence of the adjustment propose....
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.... the assessment year under consideration as per the provisions of the Act. 10. The learned AO has erred in initiating penalty proceedings under Section 271(1)(c) of the Act. Each of the above ground of appeal is without prejudice to and independent of one another. The Appellant craves leave to add, alter, amend or delete the above ground of appeal at or before the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law." 33. Assessee has filed its return of income on 30/11/2015 declaring total income of Rs. 378,55,73,760/- [wrongly mentioned in Draft and Final assessment orders as well as in DRP directions Rs 378,55,73,76,055/-] . The draft assessment order was passed on 26 December 2018 at Rs. 432,57,48,208/- . Assessee filed an objection before the learned dispute resolution panel, the relevant directions were issued on 9/9/2019, pursuant to that final assessment order was passed determining total income of the assessee at Rs. 432, 38,13,634/-. Assessee is aggrieved with that order and has preferred this appeal. 34. Ground number 1 is general in nature and ground number 2 ....
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....lue of the transaction was made of the contract pursuant to which the disallowance of depreciation resulted in subsequent years. In that year in ITA number 1955/M/2016 dated 19/3/2020 wherein per paragraph number 27 the coordinate bench deleted the adjustment made to the cost of Master service agreement. Therefore, when the original addition itself is deleted, the consequential disallowance of depreciation in subsequent year cannot be sustained. On identical facts, coordinate bench for assessment year 2012 - 13 per paragraph number 46 deleted the disallowance of depreciation, therefore, respectfully following the decision of coordinate bench in assessee's own case, we direct the AO to delete the disallowance of depreciation on the acquisition of Master service agreement from foreign AE. Accordingly ground number 3 - 5 of the appeal is allowed. 39. Ground number 6 is with respect to the disallowance of depreciation on intangible asset representing acquisition of business contracts of Rs. 518,502,824/-. The briefly stated the facts show that the business and commercial rights were quite by assessee from WNS capital investment Ltd in respect of Master service agreement entered into....
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....ar 2011 - 12 and 2012 - 13 as per paragraph number 48 of that order wherein the coordinate bench followed the orders in the case of the assessee for earlier years, we do not have any reason to deviate from the same as there is no change in material facts and circumstances of the case, therefore respectfully following the decision of the coordinate bench we direct the learned assessing officer to grant depreciation to the assessee on intangible asset. Further when the transfer pricing addition made in the case of the assessee for assessment year 2011 - 12 is already deleted with respect to the transfer price of the amount of acquisition of the share and when in subsequent years it is held to be an intangible asset, there is no reason to uphold the action of the learned AO. Accordingly ground number 6 of the appeal is allowed. 43. Ground number 7 is with respect to the disallowance u/s 14 A of the act of Rs. 1,97,37,049/- made by the learned AO by invoking the provisions of rule 8D of the income tax rules 1962. The fact shows that assessee has earned income of Rs. 145,541,748 from mutual funds which is exempt u/s 10 (35) of the income tax act 1961. The assessee disallowed a sum of....
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....12 - 13. 45. The learned departmental representative vehemently supported the order of the learned assessing officer. 46. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the order of the coordinate bench in assessee's own case for assessment year 2012 - 13. In this case we find that the assessee has earned exempt income from mutual funds and offered the disallowance of Rs. 1,170,329/-. The learned assessing officer without recording any satisfaction that why the explanation offered by the assessee is not correct, invoke the provisions of rule 8D for working out disallowance u/s 14 A of the act. We find that according to the provisions of Section 14 A (2) the learned assessing officer before invoking application of rule 8D is required to satisfy about the correctness of the claim of the assessee in respect of expenditure incurred in relation to the exempt income having regard to the accounts of the assessee. We find that in the present case the learned assessing officer did not consider at all that why the disallowance offered by the assessee is incorrect. In view of absence of any satisfaction made by the learned as....