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2018 (6) TMI 1825
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.... and modernization services for power plants and turbines. The assessee filed its return of income on 25.10.2012 declaring total income of Rs.7,91,22,173. 3. Since the assessee had undertaken international transaction with its AE's, the Assessing Officer referred the matter to the TPO u/s. 92 CA (3) of the IT Act. The TPO during the T. P. assessment proceedings observed that assessee has undertaken the following international transactions which it is AE's during the year. S. No. Nature of Transactions Amount in INR 1. Provision of technical services 323.487,821/- 2 Provision of payroll administration services 85,544,679/- 3 Purchase of payroll administration services 6,553,185/- 4. Reimbursement of expenses 90,509,257/- Total 506,094,942/- 4. The TPO passed the order u/s 92CA(3) dated 28.01.2016, wherein he took due consideration to the objections of the assessee in regard to inclusion of comparables and errors in arm's length margin calculations and determined the following comparables to be used in the assessee's case for computing the arm's length margin: S.No. Company Name OP/OC % 1 HSSC (India) L....
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....aw, the assessment order passed by the Ld. AO pursuant to the directions of the Hon'ble Dispute Resolution Panel (DRP) is bad in law and invalid to the extent the additions made in the final assessment order. 2. That on the facts and circumstances of the case and in law, the transfer pricing adjustment undertaken by the Ld. AO / Ld. Transfer Pricing Officer (Ld. TPO) is bad in law and therefore the adjustment should be deleted. 3. That on the facts and circumstances of the case and in law, the Ld. AO following the directions of the Ld. TPO/ Hon'ble DRP erred on facts and in law in making an upward adjustment to the income of the Appellant by INR 3,20,01,219 holding that the international transactions of the appellant pertaining to provision of Technical Services does not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in: 3.1. not appreciating that none of the conditions set out in section 920(3) of the Act are satisfied in the present case; 3.2. disregarding the arm's length price (ALP) as determined by the Appellant in the Transfer Pricing (TP) documentation maintained by it in terms of section 92D....
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..... 8. That on the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble DRP erred in holding that the Travel and Conveyance expenses of INR 2,28,15,393 warrant disallowance under section 4o(a)(i) of the Act. 8.1. The Ld. AO and the Hon'ble DRP erred in holding Travel and Conveyance expenses to be in the nature of Fee for Technical Service (FTS) as per section 9(i)(vii) of the Act and Fee for Included Services (FIS) as per article 12(4) of Double Taxation Avoidance Agreement (DTAA) between India and the USA. 8.2. The Ld. AO and the Hon'ble DRP failed to appreciate that the said amount represents merely reimbursement of expenses on a cost-to-cost basis to the group company. 8.3. Without prejudice, that on the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble DRP erred in not appreciating that the services provided by the employees seconded to Appellant company do not 'make available' any technical know-how, skills, etc., as provided under the DTAA between India and USA. 9. That in the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble DRP failed to appreciate that the sum....
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....hat HSCC (India) Private Ltd., is also a Government company. Referring to the decision of the Tribunal in assessee's own case in the immediately preceding assessment year he submitted that HSCC (India) Ltd. was rejected as a comparable being a Government company. He accordingly submitted that HSCC (India) Limited be rejected from the list of comparables. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of Shell India Markets Pvt. Ltd. Vs. ACIT vide ITA No. 193/M/2013 and Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ld. Vs. DCIT in ITA No. 882/Del/2014. 9. So far as Mahindra Consulting Engineers Limited is concerned he submitted that it is a consultancy company and is engaged in under taking diversified projects in the infrastructure sector by providing consultancy services in the area of SEZ, water supply and the sewerage, solid waste management, urban infrastructure etc. Based on the above, it was rejected in the case of Emerson Process Management Power & Water Solutions India Private Limited vide ITA No.5343/Del/2012) comparable. 10. Referring to the decision of the Bangalore Bench of the Tribunal in the case CISCO Systems (Ind....
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....ent services in various automotive segments that include two-wheeler, passenger car, commercial vehicle, off-highway, farm and construction, and aerospace equipment in body engineering, chassis design, powertrain, interior trims, electronics, telematcis, and tool design domains. He submitted that this company has 58.63% RPT and therefore, should be excluded from the list of comparables. 14. The Ld. Counsel for the assessee also requested for inclusion of the 2 comparables companies namely MN Dastur & Company Pvt. Ltd. and EDCA Engineering Private Limited. 14.1 So far as MN Dastur & Company Pvt Ltd. is concerned he submitted that the company was not selected by the assessee in the T. P. documentation on account of non-availability of data in public domain. However, at present the Annual Report of the company is available in public domain, a copy of which is enclosed at pages 1032 to 1182 of the paper book. It is involved in provision of services related to engineering projects like feasibility study, design and engineering, construction management, product management, inspection, operational assistance and business and technology consulting etc. which is akin to the functions ....
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....s concerned we find HSCC India Ltd. is a Government company. However, it is not clear from the submission filed by the assessee as to whether HSCC (India) Ltd. has received any grant or incentives from the Government. Further the submission of Ld. Counsel for the assessee that HSCC (India) Ltd. is engaged in diversified activities also requires to be verified. We, therefore, restore the issue of inclusion / exclusion of this company to the file to the TPO with the direction to verify from the annual accounts and other details to be furnished by the assessee and decide the issue. While doing so he shall also keep in mind the decision of the Tribunal in assessee's own case for A. Y. 2011-12 wherein this company was excluded from the list of comparables. We, therefore, restore this comparable to the file of the TPO with the direction to decide the issue of exclusion of HSCC India Ltd afresh after giving due opportunity of being heard to the assessee. 18. So far as exclusion of Mahindra Consulting Engineer Limited is concerned we find from the order of the Tribunal in assessee's own case for A.Y. 2010-11 that the Tribunal vide in ITA No. 1486/Del/2015 order dated 04.08.2017 had dire....
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....r, it is the submission of Ld. Counsel for the assessee that this company is functionally dissimilar being a consulting company and is engaged in undertaking diversified projects in the infrastructure sector by providing consultancy services in the area of SEZ, water supply and sewerage, solid waste management, urban infrastructure etc. It has highly technical capabilities of excluding infrastructure development projects further it has got significant RPT of 41.56% which is more than trash hold limit of 41.56 %. We, therefore, restore this issue to the file of the Assessing Officer / TPO to verify the functional dissimilarity as well as the RPT and decide the issue of inclusion or exclusion of this company afresh. Needless to say that the Assessing Officer / TPO shall given due opportunity of being heard to the assessee. 20. So far as Mitcon Consultancy and Engineering Services Ltd., is concerned we find this company provides services to the banking division, entrepreneurship and vocational training division, E-schools and BT and Pharma sector. Revenue earned by the company from services other than consultancy is approx.43% of the total revenue. Milton also owns fixed assets suc....
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....assessee. 22. So far as inclusion of M. N. Dastur & Company Private Ltd. is concerned we find this company was directed to be retained in the list of comparables by the Tribunal in assessee's own case for A. Y. 2010-11 and 2011-12. We find the Tribunal in assessee's own case for A. Y. 2010- 11 has directed the TPO to retain this company by observing as under :- i) MN Dastur & Co Pvt. Ltd. 7.1 The Assessee treated this company as comparable. The TPO excluded the same by holding that the Annual Report of this company was not available in public domain. The Assessee objected before the DRP against the exclusion of this company by urging that: 'the company is engaged in engineering projects from initial feasibility to commencement of operations under one single umbrella. It is involved in provision of services related to engineering projects like feasibility study, design & engineering, construction management, product management, inspection, operational assistance I and business and technology consulting'. The DRP did not take cognizance of this contention raised before it vide para 4.132 of the Assessee's objections. This is how this company was finally excluded ....
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....d and submissions are made before the DRP, we are of the considered opinion that this fact needs verification. We, therefore, set aside this aspect to the file of the TPO to verify the RPT of EDAC Engineering Company Services Ltd. with reference to the annual report and other record, if any, to be submitted by the assessee. " 25. Respectfully following the order of the Tribunal in assessee's own case cited (Supra) we restore this issue to the file of the TPO to adjudicate the inclusion of this company in the light of the direction of the Tribunal. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee. The above grounds are accordingly allowed for statistical purposes. 26. In grounds of appeal No. 8 and 9 the assessee has challenged the action of the Assessing Officer in disallowing re-imbursement of travelling and conveyance expenses of Rs.2,28,15.393/- and the reimbursement of Salary and Allowance of Rs.6,64,77,837/- u/s 40 (a) (i) of the I. T. Act, 1961. 27. So far as reimbursement of Travel and Conveyance expenses of Rs.2,28,15,393 is concerned, the Ld. Counsel for the assessee submitted that the said amount represents reimburs....
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.... (3) DCIT vs. Dhaanya Seeds (P) Ltd. [2013] 64 SOT 15 (Bangalore ITAT) (4) CIT vs. EON Technology (P.) Ltd. [2011] 343 ITR 366 (Delhi HC) (5) DIT vs. Ericsson Communications Ltd. [2015] 61 taxmann.com 117 (Delhi HC) (6) CIT vs. Divi's Laboratories Ltd. [2011] 12 taxmann.com 103 (Hyderabad ITAT) 31. He submitted that the travel and conveyance expenses/payments were in nature of reimbursement of expenses, made on cost to cost basis without there being any element of income embedded therein. Referring to the copy of invoices raised by Granite USA and the backup documentation (on sample basis) filed before AO vide letter dated March 17, 2016 he submitted that on a perusal of supporting evidences, it is seen the payments are actual reimbursement of expenses incurred by these parties outside India and there is no element of income embedded in such payments. 32. Referring to the following decisions, he submitted that reimbursement of expenses with no income element embedded therein requires no tax deduction in India. (1) CIT vs. Tejaji Farasram Kharawalla Ltd. [1968] 67 ITR 95 (2) Mahindra & Mahindra Ltd. vs. DCIT [2009] 313 ITR (AT) 263 (Mumbai) (SB) : 22 DTR ....
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....he cost which was initially incurred by Granite USA on behalf of the assessee. Relying on various decisions, he submitted that being mere reimbursement of Salary and Allowance cost, no deduction of tax is warranted in respect of such amount paid to Granite USA. He relied on the decisions which were cited while arguing disallowance of Travel and Conveyance expenses. 38. Without prejudice to the aforesaid submission that the reimbursement of salaries and allowances to Granite USA is in the nature of reimbursement of expenses and not liable to tax deduction in India, he submitted that in the case of the assessee, the services provided by seconded employees do not fall in the purview of FIS under India- USA DTAA and therefore, not liable to tax in India. He submitted that in the present case, the employees who were seconded in India were rendering services which were in the nature of erection, installation, commissioning, warranty administration, operation and maintenance, inspection, renovation and modernization in relation to power plants and turbines. The services of the seconded employees are procured on a regular basis and there is no imparting of any technical knowledge, skill....
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....sing Officer. " 41. Respectfully following the order of the Tribunal in assessee's own case in the preceding assessment year we deem it proper to restore this issue to the file of the Assessing Officer/TPO for adjudication of the issue afresh. Needless to say, the Assessing Officer / TPO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The above grounds are accordingly allowed for statistical purposes. 42. Ground of appeal No. 10 relates disallowance of Rs. 517,463/- on account of delayed contribution made to Employees Provident Fund (EPF) 43. Ld. Counsel for the assessee submitted that in the final assessment order, following the directions of DRP, the AO made disallowance of Rs. 5,17,463 on account of delay in deposit of EPF as per the due dates defined under the PF Act. However, the AO ignored the fact that the said EPF contributions have been duly deposited before the filing of return of income and accordingly allowable as per Section 43B of the Act. He submitted that the amount of Rs.517,463/- falling due on 20.06.2011 was deposited on 24.06.2011. The AO merely relying on section 2(24)(....