TaxTMI 
TaxTMI 
2022 (10) TMI 1149
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....w and on facts, by determining the arm's length price ('ALP') of the international transaction pertaining to payment of management charges ("Area Management Cost / Corporate Management Cost") made to the associated enterprise ("AE") at NIL. 1.2 The learned DCIT / DRP has failed to appreciate the fact that though APA signed between the appellant and CBDT pertains to subsequent financial years, it has a persuasive value and can be considered for the year under consideration. 1.3 The learned DCIT / DRP has erred in not understanding the contention of the appellant for submission of the documents by the appellant as per the Advance Pricing Agreement ('APA') entered into by the appellant with the Central Board of Direct Taxes CCBDT'). 1.4 The learned DCIT / DRP has erred in rejecting Transactional Net Margin Method ("TNMM") selected by the Appellant in its transfer pricing study report for benchmarking the transaction of payment of management charges and failed to appreciate that the management charges was incurred in connection to the main business activity of the assessee i.e. engineering design services. Further, the learned DCIT / DRP has erred in taking a ....
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....rein based on similar facts, the Hon'ble ITAT had held that software expenses should be allowed as revenue expenditure. 3. Effect to directions issued by the Hon'ble DRP 3.1 The learned DCIT erred in not giving effect to the following directions of the DRP passed on 23 December 2016: * Negative turnover and prior period expense of Rs. 15.34.411 Para 4.3.1 at page no. 23 of the DRP directions - "Since, there is no change in fact in this year regarding the prior period expense, respectfully following the directions of this panel in AY 2009-10, AY 2010-11 and AY 2011-12, the objection is accepted and the AO is directed to allow the deduction of Rs. 15,34,411 to the assessee." * Disallowance of Rs. 72,23,445 under section 14A read with rule 8P of the Income-tax Rules. 1962 Para 5.3 at page no. 32 of the DRP directions - "...However, we are in agreement with the claim of the assessee that investment in Growth mutual funds and taxable bonds of Rural Electrification Corporation Ltd. should be excluded from the list of investment for earning exempt income. The AO is directed to recalculate the amount of disallowance accordingly." 4. Initiation of penalty proceedin....
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.... the tax payer and Central Board of Direct Taxes (CBDT) pertains to the subsequent financial years, it has a persuasive value and can be considered for the year under consideration. But Ld. DRP has erred in appreciating this fact. The Ld. A.R. for the tax payer relied upon the order passed by co-ordinate Bench of the Tribunal in case of FIS Global Business Solutions India Pvt. Ltd. vs. DCIT in ITA No.422/Del/2019 & ors order dated 18.06.2020. 6. On the other hand, the Ld. D.R. for the Revenue contended that since every year is to be decided separately on the basis of facts and circumstances of the case APA, if any, entered into between the tax payer and the CBDT cannot be applied to the year under consideration. 7. Undisputedly, for the subsequent years tax payer entered into APA with CBDT qua the identical TP grounds raised in this appeal. It is also not in dispute that business model of the tax payer has not undertaken any change vis-à-vis subsequent financial years. We are of the considered view that when TP issues are identical and there is absolutely no change in the business model of the tax payer during the year under consideration vis-à-vis subsequent financ....
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....n favour of the taxpayer in the similar facts and circumstances by relying upon the APA which was for subsequent years by observing as under :- "13. We have considered rival contentions and carefully gone through the orders of the authorities below, APA dated 30th August 2016, as well as the order passed by the Tribunal dated 01/06/2018 in case of assessee's AE. We found that APA has laid down the application of most appropriate transfer pricing method and the arm's length price for these transactions. We also found that after having a great discussion, the Functions performed, assets employed and risk undertaken by the assessee and its associated enterprises was found to be reasonable. Accordingly, we allow assessee to withdraw these grounds for the A.Y.2008-09 and 2009-10 in so far as these grounds are covered by the APA, the principle laid down in the APA for benchmarking analysis in respect of the international transactions being guidance value since there is no change in the said assessment years in the nature of international transactions. We also direct the Department to pass an order giving effect u/s.92 CD (5) of the Act in the A.Y. 2010-11 & 2011-12. Whereas for....
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.... the Union of India to stop multiplicity of the litigation and this case falls in the category of cases where litigation can be minimized. Consequently, we are of the considered view that APA already entered into between the tax payer and CBDT has the persuasive value so the matter is remitted back to the TPO to decide afresh in the light of the APA already entered into by providing opportunity of being heard to the tax payer. So aforesaid grounds 1.1 to 1.10 are determined in favour of the assessee for statistical purposes. Corporate Grounds: Ground No.2 11. TPO/DRP have disallowed computer software expenses of Rs.14,74,19,626/- by treating the same as capital in nature, which are under challenge before the Tribunal. Ld. A.R. for the assessee contended that this issue has already been decided in favour of the assessee by the co-ordinate Bench of the Tribunal which has already been confirmed by Hon'ble Bombay High Court vide order dated 20.01.2020 in ITA No.1276 of 2017. This fact is not disputed as DRP in para 3.2.1 has already admitted this fact by returning following findings: "3.2.1 The assessee has pointed out that the issue has been decided in its favour by the ITAT, M....