TaxTMI 
TaxTMI 
2016 (11) TMI 1734
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....anies which are not functionally comparable; c. denying economic adjustment to the Appellant; d. using current year's financial data (i.e. Financial Year 2007-08) as against average margin of 3 years of comparable companies; and e. denying (+/-) 5% range benefit available under proviso to Section 92C(2) of the Income-tax Act, 1961 (the Act). The Appellant prays that the AO be directed to delete the aforementioned adjustment. 2. On the facts and circumstances of the case, and in law, the learned AO/ DRP/ TPO erred in making a notional addition of Rs. 14,49,180/- towards interest on perceived delay in collection of receivables from the associates enterprises. The Appellant prays that the aforementioned notional addition be deleted. 3. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in directing and the learned AO erred in not allowing deduction in respect of foreign travel expense of Rs. 27,00,124/- (being 25% of the total foreign travel expense of Rs. 1,08,00,496). It is prayed that the AO be directed to delete the disallowance of foreign travel expense." 3. Before we proceed to adjudicate the respective Grounds of appeal,....
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....t in conformity with the aforesaid order of TPO as the objections filed by the assessee before the Dispute Resolution Panel (DRP) against the draft assessment order were not accepted. In this background, assessee is in appeal before us. 5. Before us, the learned representative for the assessee has raised two issues which relate to inclusion of certain concerns in the final set of comparables, which according to the assessee is not justified. Before we proceed further to evaluate the two specific pleas raised before us, it would be appropriate to bring out the functions performed by the assessee in the course of rendering support services to the associated enterprises in connection with research and development. Notably, the support services provided by the assessee are in the nature of laboratory research and analytical/testing facilities for certain products developed and/or manufactured by the associated enterprises. From the order of authorities below as well as other material on record, it emerges that assessee provided assistance to its associated enterprises in conducting and co-ordinating testing, trials and experiments; interpretation of results of various such trials; ass....
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....phold the contentions of the assessee that the said company cannot be included." 7. It has been canvassed before us that there is no change in facts in the instant year as compared to Assessment Year 2007-08 and, therefore, the decision of Tribunal dated 21.11.2012 (supra) is squarely applicable in this year also. On this aspect, we find that before the TPO also, assessee had asserted that the activities carried out by M/s. Celestial Labs Ltd. were not comparable with the activities of assessee and, therefore, it was not a good comparable. The submissions of assessee have been reproduced by the TPO in para 6.1 of his order. The submissions put forth by the assessee show that M/s. Celestial Labs Ltd. is a concern engaged in software development which, inter-alia, also included development of software products. The order of Tribunal dated 21.11.2012 (supra) brings out that the functional profile of the said concern has been found to be incomparable with the activities undertaken by the assessee in the course of providing support services to its associated enterprises in connection with research and development. Considering the aforesaid precedent and also that the fact-position in t....
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....an margin of the remaining comparables would come to 23.16%, which would fall within the + 5% range vis-a-vis assessee's margin of 19.05%, as mandated u/s 92C(2) of the Act. Therefore, the international transactions of provision of support services in connection with research and development rendered by the assessee to its associated enterprises would be at arm's length price and no further adjustment would be required. We have already upheld the plea of assessee for exclusion of M/s. Celestial Labs Ltd. and M/s. TCG Lifesciences Ltd. from the final set of comparables and, therefore, the matter is restored back to the file of Assessing Officer who shall verify the aforesaid contention of assessee and accordingly delete the addition of Rs.1,28,41,639/-. At this stage, we may also note that the other pleas raised by the assessee in its Grounds of appeal with regard to addition of Rs.1,28,41,639/- are rendered academic and have not been adverted to, and they are kept open, since necessary relief already stands allowed to the assessee. Thus, insofar as Ground of appeal no. 1 is concerned, assessee succeeds, as above. 12. The next Ground raised by the assessee is with respect to additi....
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....sentative, on the other hand, relying upon the order of the TPO and DRP's direction, submitted that in some cases delay is of more than 200 days and if one has to judge in relation to the third party whether such a long credit would have been given by the assessee. Therefore, the TPO has rightly charged the interest. 28. After carefully considering the rival submissions and the orders of the TPO as well as the direction of the DRP, we find that the assessee has no interest liability and it does not have any external borrowings. Even if the payments have been made by the A.E. beyond the normal credit period, there is no interest cost to the assessee. Moreover, there is no such agreement whereby interest is to be charged on such a delayed payment. From the summary of payment submitted by the learned Counsel, it is seen that the billing is done on quarterly basis and, accordingly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, on the fa....