TaxTMI 
TaxTMI 
2022 (11) TMI 444
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....section 143(3) r.w.s. section 144C(13) r.w.s. section 144B of the Act in pursuance of the directions dated 23 March 2021 issued by the Honorable Dispute Resolution Panel -3, WZ (hereinafter referred to as 'Hon'ble DRP'), on the following grounds: On the facts and in the circumstances of the case and in law, the Hon'ble DRP and consequentially the learned AO have: Grounds of Objections in respect of transfer pricing adjustment 1. General ground challenging the transfer pricing adjustment of INR 44,64,54,953 consequential to non-consideration of comparability analysis as documented in the transfer pricing study report Erred in making transfer pricing adjustment of INR 33,06,35,792 to Appellant's international transactions in the nature of provision of software development services and of INR 11,58,19,161 to the international transactions in the nature of information technology enabled services (hereinafter referred to as 'ITeS') and not considering the comparability analysis documented in the transfer pricing study report for benchmarking analysis. 2. Non-consideration of comparability analysis as documented in ....
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....5% related party transactions (i.e. income as well as expenses) to total income filter applied by the Appellant; 5. Acceptance of companies having supernormal profits Erred on facts and in circumstances of the case and in law by including companies having supernormal profits in the set of comparable companies in respect of international transactions pertaining to provision of software development services and provision of IT enabled services. 6. Rejection of certain comparable companies identified by the Appellant in the transfer pricing study report Erred in rejecting certain comparable companies from the comparable set identified by the Appellant in the transfer pricing report in respect of international transactions pertaining to provision of software development services and ITeS. 7. Accepting certain additional companies as com parable in relation to provision of software development services and ITeS Erred in accepting certain additional companies as comparable to the Appellant in relation to provision of software development services and ITeS. 8. Accepting MPS Ltd. as a comparable company to ITeS segment of the A....
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....ing adjustment 13. Erred in disallowance of Primary Rate Interface (PRI) Line charges paid to telecom companies amounting to INR 1,18,04,423 on account of non-withholding of taxes Erred in disallowance of the charges paid to telecom companies such as Bharti Airtel, Tata Communications, and Vodafone Cellular under section 40(a)(ia) by treating the same as leased line charges and not appreciating the fact that the above charges are for standard PRI line charges, which require no human intervention and consequently, does not qualify as fees for technical services 14. Erred in disallowance of expenditure of INR 3,50,51,094 made pursuant to ESOP scheme floated by the Appellant's parent company Erred in disallowance of the expenses incurred pursuant to ESOP scheme treating the same as a capital item akin to securities premium and not appreciating the fact that these expenses are deductible under section 37 of the Act III. Other grounds of appeal 15. Erroneous levy of interest under section 234B and 234C of the Act Erred in levying additional interest under section 234B and section 234C of the Act of INR 11,33,09,568 and I....
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....ommunication cost; E. Purchase of fixed assets; F. Recovery of expenses; and G. Reimbursement of expenses. The Arm's Length Price ('ALP') of the transactions and the concerned issues are given at para 6 of the said agreement in sub-clause (a) and (b) as follows: (a) The international transaction related to provision of software development services (including professional services) shall be considered to be at arm's length for previous years 2011-12 to 2019-20 if the operating profit margin in relation to operating cost of the Applicant in each previous year is not less than 16.00%. (b) The international transaction related to provision of information technology enables services shall be considered to be at arm's length for previous years 2011-12 to 2019-20 if the operating profit margin in relation to operating cost of the applicant in each previous year is not less than 15.00%. 3. In this background the assessee further submitted as follows: 2. For your honour's consideration it is submitted that BMC India had filed the captioned appeal against the additions made by the A.O on transfer pricing issues as well as corporate....
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....details in relation to TP adjustment made towards the provision of software development services and information technology enabled services with AEs covered under signed APA and proportionate TP adjustment made towards AEs not covered under signed APA are tabulated below for your honour's easy reference: Sr No Nature of international transaction Total TP adjustment upheld as per final assessment order Amount (INR) TP adjustment towards international transactions covered under APA Proportionate TP adjustment towards BMC Finland and BMC Software GMBH, Austria 1 Software Development services 33,06,35,792 33,06,32,712 (99.99%)** 3,080 (0.0014%)** 2 Information Technology enabled services 11,58,19,161 11,58,19,161 (100%) 0 Total 44,64,54,953 44,64,51,873 3,080 **Percentage (%) of transactions with covered AEs and Non-covered AEs as computed In Annexure 2 7. ln view of the above, BMC India would like to mention that the international transactions pertaining to software development services and information technology enabled services and undertaken with AEs covered under signed APA do not require any fur....
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....sions of the assessee, the A.O held that the assessee is engaged in the software development and production of software products. Telephone with high quality of network is required for such work. Therefore, it is technical service and hence TDS has to be deducted u/s 194J of the Act . The A.O has also observed that similar addition was confirmed by the D.R.P. in assessee's own case for A.Y. 2014-15 and 2015-16. In the assessment order, this issue has been dealt with on page 9 para 6.3 onwards. The A.O held therefore, that it is a technical service and TDS has to be deducted u/s 194J of the Act. Similarly, the ld. D.R.P have given their findings on this issue from para 14.2 of their order and at para 16.6 and 16.7 it was held as follows: 16.6 The above mentioned contentions of the assessee have been carefully examined and they are found to be untenable for the following reasons: (a) While the A.O. stated that the payments made by the assessee to the telecom service providers are towards dedicated leased lines, the assessee claimed that the payments were made towards use of PRI lines which are not dedicated leased lines. However, it is noticed that the assessee has ....
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.... the same as leased line charges and not appreciating the fact that the above charges were for standard PRI line charges which require no human intervention and consequently does not qualify as fees for technical services. In this regard, at the very outset, the ld. Counsel submitted that the issue is squarely covered by the decision of the Hon‟ble Jurisdictional High Court in favour of the assessee in the case of Pr. CIT-2 Vs. Lee & Murihead (P) Ltd. [2020] 119 taxmann.com 499 (Bombay). It was held by the Hon‟ble Bombay High Court as follows: "The last question (i.e. question No. (d) pertains to the disallowance u/s 40(a)(ia) of the Act on account of non-deduction of tax at source by the assessee while making payment to Vi9desh Sanchar Nigam Ltd. Towards leased line charges. On merits, the Revenue had placed reliance on a decision of this Court in case of CIT Vs. Kotak Securities Ltd. [2012] 20 taxmann.com 846/340 ITR 333 (Bom. The Tribunal however, held that the amount in question was below Rs. 10 lakhs which was a minimum monetary limit enabling the Revenue to prefer appeal against the Commissioner's Appellate orders before the Tribunal. Revenue argues befor....