TaxTMI 
TaxTMI 
2023 (2) TMI 502
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.... 143(3) of the Income-tax Act, 1961 (the Act) dated 28th January, 2016, where the return of income filed by the assessee on 15th January, 2011 at a total income of Rs.328,69,20,549/- was assessed at Rs. 330,57,25,170/-. 02. The respective grounds of appeal in ITA No. 1715/Mum/2016 is under: - "Based on the facts and circumstances of the case, Morgan Stanley India Company Private Limited (hereinafter referred to as the 'Appellant] respectfully craves leave to prefer an appeal under section 253 of the Act against the order dated 28 January 2016 (received on 1 February 2016) passed by the Assistant Commissioner of Income-tax-4(3)(2), Mumbai [hereinafter referred to as the learned AO], in pursuance of the directions issued by Dispute Resolution Panel-III, Mumbai (DRP). Ground 1: Disallowance under section 14A of the Act 1. On the facts and circumstances of the case, the learned AO, based on the directions of Honourable DRP, erred in disallowing Rs 1,70,70,056 under section 14A of the Act. 2. On the facts and circumstances of the case, the learned AO, based on the directions of the Hon'ble DRP erred on the following grounds. 2.1 In....
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....ent either on the no. of scripts involved, or on the value of contract, and the aspect of no. of contracts' is vital in determining the brokerage to be charged." 04. The grounds in the Cross Objection No.145/Mum/2016 is as under:- "Based on the facts and circumstances of the case. Morgan Stanley India Company Private Limited (hereinafter referred to as the Respondent) craves leave to prefer cross objections against the appeal filed by the Assistant Commissioner of Income-tax, Circle 4(3)(2). Mumbai (hereinafter referred to as the learned AO] against the order issued under section 143(3) read with section 144C(13) of the Income-Tax Act, 1961 (Act) in pursuance of the directions of the Honourable Dispute Resolution Panel-Ill, Mumbai (hereinafter referred to as the Honourable DRP) for the AY 2011-12 Ground of Appeal - 1: Adjustment to the Arm's Length Price (ALP) of the brokerage received by the Respondent 1. On the facts and circumstances of the case, the learned AO and the Honourable DRP have legally erred in law and in fact in determining the ALP of brokerage received by the Respondent on Clearing House (CH) trades and Delivery versus Payment (DVP)....
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....ort services income relating to the equity business amounting to Rs.2,04,39,148/- and also investment banking services income of Rs.64,53,37,040/-. The provision of broking and derivatives income and support services were benchmarked using Transactional Net Margin Method as the most appropriate method and investment banking services was benchmarked using profit split method and also Transactional Net Margin Method. The learned Transfer Pricing Officer noted that there is an adjustment history in the earlier assessment years wherein Transactional Net Margin Method adopted by the assessee is rejected and Comparable Uncontrolled Price is adopted. The Transfer Pricing Officer benchmarked the transaction on the basis of cut of all brokerage and cut off of contract basis after granting adjustment on marketing. For A.Y. 2009-10, the learned Dispute Resolution Panel directed to apply the weighted average rate in respect of clearing house trades and delivery versus payment trades. No further adjustment was allowed. The learned Assessing Officer is in appeal against such direction of the learned Dispute Resolution Panel for earlier years. Therefore, the learned Transfer Pricing Officer issue....
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.... order on 30th March, 2015. 08. Against the above order, assessee preferred the objection before the learned Dispute Resolution Panel-3, Mumbai who passed direction under Section 144C(5) of the Act on 28th December, 2015. The learned Dispute Resolution Panel on the issue of transfer pricing adjustment held that objection of the assessee with respect to the most appropriate method as Transactional Net Margin Method is not acceptable and upheld the CUP as the most appropriate method as accepted in earlier years. The objection of the assessee with respect to the deduction of marketing cost research support and volume adjustment the learned Dispute Resolution Panel held that the learned Transfer Pricing Officer has already allowed deduction of 29.5% and therefore, no further adjustment is required. The learned Dispute Resolution Panel further held that as in earlier years it has taken a view that weighted mean to take care of all these adjustments and consequently no further adjustment is required. With respect to the approach of the learned Transfer Pricing Officer it did not agree but agreed with the assessee's contention that the rate of brokerage charged is dependent on volume o....
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....he exempt income no further arguments were pressed. 013. The learned Departmental Representative could not show us any reason against the above decision in assessee's own case. 014. On careful consideration, respectfully following the decision of ITAT in assessee's own case for A.Y. 2010-11, we direct the learned Assessing Officer to restrict the disallowance under Section 14A of the Act to the extent of exempt income only. Accordingly, the ground no.1 of the appeal is partly allowed. 015. Assessee did not press ground no.4 of the appeal regarding deduction under Section 80G of the Act and therefore same is dismissed. 016. With respect to ground no.2, the grievance is that credit for TDS amounting to Rs.17,24,18,686/- was claimed but was allowed only to the extent of Rs.17,09,87,738/-. Though, nothing is argued before us but we direct the learned Assessing Officer to verify the claim of the assessee, if substantiated before him and decide in accordance with the law. 017. Accordingly, ITA No. 1715/Mum/2016 for A.Y. 2011-12 filed by assessee is partly allowed. 018. Coming to the CO of the assessee in CO no.145/Mum/2016, ground no.1 relates to the adjustment of Arm's....
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....e Tax Act. He submitted that in paragraph no.5.11, the learned Dispute Resolution Panel following its earlier years direction has directed the learned Transfer Pricing Officer to compute the weighted average brokerage rate which is not in accordance with the law. He referred to Section 92C of the Act and submitted that where more than one price is determined by the most appropriate method, the Arm's Length Price shall be taken to be the arithmetic mean of such price. He therefore, submitted that where in the CUP method several price are determined then the mandate of law is only to take arithmetic mean of such prices. The learned Dispute Resolution Panel has directed the learned Transfer Pricing Officer to compute the weighted average mean of the several prices is not in accordance with the provisions of the law and therefore, the learned Assessing Officer is aggrieved and is in appeal. He submitted that the identical issue arose in the case of RBS Equities (India) Ltd. Vs. ACIT [2017] 79 taxmann.com 87 (Mumbai)wherein in paragraph no. 6.4, the co-ordinate Bench has categorically held that arithmetic mean should be adopted. It cannot be the arithmetic mean of weighted average. He f....
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....organ India Pvt. Ltd in Income Tax Appeal No.599/14 dated 7thJuly 2017 stating that identical transactions were before Hon'ble High Court. He further referred to the decision of the co-ordinate Bench in case of Saunay Jewels Pvt. Ltd. ITA No.5758/Mum/2009 for A.Y. 2004-05 dated 31st August, 2010, wherein the co-ordinate Bench in paragraph no.20, the weighted average was adopted as against simple arithmetic average adopted by the learned Assessing Officer. It was further stated that in paragraph no. 18, the provision of Section 92C(2) was also considered. He further referred to order under Section 92CA(3) of the Income Tax Act for A.Y. 2006-07 wherein the learned Transfer Pricing Officer himself has accepted the weighted average commission income. He further referred to the appeal filed by the learned Assessing Officer for A.Y. 2003-04, wherein the learned Assessing Officer himself did not challenge the weighted average method but as per ground no.6, where the learned Transfer Pricing Officer himself has taken a weighted average of brokerage charged. He referred to ground no.6 and submitted that in that assessment year the situation was reversed. The learned CIT (A) directed the....
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....iate method, the arm's length price shall be taken to be the arithmetical mean of such prices: 032. 'Arithmetic mean' means add up all the values and divide the sum by the number of values. It does not have any scope for any weight to any value. To interpret it in any other manner is violence to plain meaning of the section. It has no reason to include weighted average. The plain meaning rule dictates those statutes are to be interpreted using the ordinary meaning of the language of the statute. 033. In A.N. Roy Commissioner of Police v. Suresh Sham Singh reported in AIR 2006 SC 2677, the Hon'ble Apex Court held that, "It is now well settled principle of law that, the Court cannot change the scope of legislation or intention, when the language of the statute is plain and unambiguous. Narrow and pedantic construction may not always be given effect to. Courts should avoid a construction, which would reduce the legislation to futility. It is also well settled that every statute is to be interpreted without any violence to its language. It is also trite that when an expression is capable of more than one meaning, the Court would attempt to resolve the ambiguity in a manne....