TaxTMI 
TaxTMI 
2022 (10) TMI 1149
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....in upholding an adjustment of Rs. 45,600,001 in law 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 ....
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....t following the order of the Hon'ble Income-tax Appellate Tribunal [ITAT] in the appellant's own case for assessment year 2009-10 wherein 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 Corpo....
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....er Pricing Grounds Ground No.1.1 to 1.10 5. At the very outset, the Ld. A.R. for the tax payer contended that he has raised a specific ground before Ld. DRP that though Advance Pricing Agreement (APA) signed between 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....
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...., we hold that upward adjustment of Rs.8,83,93,866/- is without any basis and is directed to be deleted." 25. Coordinate Bench of the Tribunal in another case tilted as Spencer Staurt (India) Pvt. Ltd. vs. ACIT (supra) also decided the identical issue in 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 intern....
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.... of the international transactions entered into during the year under consideration vis-à vis subsequent years, principle laid down in the APA for benchmarking the international transactions in question shall have a guidance value. Moreover, in these days it is endeavor of 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....