TaxTMI 
TaxTMI 
2023 (3) TMI 1219
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....ed on the facts and circumstances of the case and in law in making an addition to the total income of the Appellant amounting to Rs. 3,34,38,510, in pursuance to the directions of the Hon'ble Dispute Resolution Panel (DRP) upholding the adjustment to the transfer price proposed by the learned Transfer Pricing Officer (Ld. TPO'). 1.1 The Ld. DRP/AO/ TPO erred in re-computing the Arm's Length Price ('ALP') of the international transaction pertaining to receipt of fees for marketing of fixed income products, including interest rate derivative products (collectively known as FID business) by the Appellant from its Associated Enterprises (AEs) as Rs. 5,08,18,810 as against Rs 1,73,80,300 and hence making an adjustment of Rs. 3,34,38,510, without appreciating the Functions Asset and Risk ('FAR') Analysis documented by the Appellant in the Transfer Pricing Study Report and various supporting documents, information, explanation submitted by the Assessee. 1.2 The Ld. DRP/AO/ TPO erred in holding that the entire market spread belongs to the Appellant and allocation of market spread is without any basis. It is prayed that the adjustment b....
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....ernational transaction pertaining to fees received for marketing of fixed income products, the assessee was asked to submit evidence of the work done by the associated enterprises. In reply, the assessee filed its global transfer pricing policy. The TPO vide order dated 28/01/2015 passed under section 92CA(3) of the Act noted that in the transfer pricing policy, functions performed by the associated enterprises are not mentioned. Accordingly, in the absence of evidence of functions performed, assets used for the said functions, and risk taken by the associated enterprises, the TPO considered the entire 'market spread' in the hands of the assessee and proposed a transfer pricing adjustment of Rs. 3,34,38,510. 5. In its objections filed before the learned DRP, the assessee submitted that the TPO has completely ignored the FAR (functions performed, assets employed and risks assumed) analysis of the assessee documented in the TP study report and attributed 100% of the transaction fees for fixed income products and interest rate derivative products to the assessee for the sales and marketing functions. It was further submitted that based on the fixed income products transfer pricing ....
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....tribution business is part of the group's global trading activity, which involves distribution/sales and trading operations of secondary market fixed income products. During the year under consideration, the Indian branch of the assessee has carried out distribution/marketing of fixed income product lines (which are booked in trading locations) in the secondary market for its associated enterprises, for which it has received marketing commission/fee based on group's transfer pricing policy. 9. The fixed income products are securities, which bear a rate of interest (fixed or floating) and a set maturity. In this transaction, the distribution/marketing locations such as the Indian branch are primarily responsible for generating/originating transactions from third-party clients. This may involve either the purchase or sale of these fixed income products. As part of its function, the Indian branch performs general marketing, client relationship management, and liaison internally for trading and research. On the other hand, UBS AG, the trading location, is engaged in carrying out the function of actually executing and booking trades marketed by the distribution/marketing location lik....
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....dition to the allocation of 50% market spread, being a transaction in derivatives. Apart from this transaction, no other transaction has resulted in 'local spread'. It is the claim of the assessee that the benchmarking/allocation of 'market spread' has been done on basis of the global scenario. 11. We find that the TPO without appreciating the FAR of the associated enterprise at the trading location allocated the entire 'market spread' of 11,07,404.89 USD to the assessee's marketing location i.e. the Indian Branch. Further, the learned DRP also rejected the objections filed by the assessee on the basis that the assessee company has executed a transaction in India and therefore the entire 'market spread' belongs to the India Branch. We are of the considered view that the lower authorities failed to appreciate that in the entire transaction, the sales/marketing function and its activities (such as trading) cannot be separated from the other functions, all of which together are necessary elements for the assessee to realise income on these transactions. Therefore, it is necessary to take into consideration the functions performed, assets employed and risks assumed by the trader-ass....
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....r add a new ground which may be necessary." 16. The brief facts of the case as emanating from the record are: In the return of income, the assessee had characterised the gains amounting to Rs. 134,76,87,031 arising transfer of debt securities as capital gains and claimed the same to be exempt under Article 13(6) of the India Switzerland Tax Treaty. During the course of assessment proceedings, the said gain was treated as business income and held to be taxable in India as the same is attributable directly or indirectly to the assessee's Permanent Establishment in India. The learned DRP vide its directions issued under section 144C(5) of the Act by following the decision of the coordinate bench of the Tribunal rendered in assessee's own case accepted the objections filed by the assessee. In conformity, the AO vide impugned final assessment order assessed the capital receipts of Rs. 134,76,87,031 as a capital gain. Being aggrieved, the Revenue is in appeal before us. 17. During the hearing, the learned DR vehemently relied upon the draft assessment order. On the contrary, the learned AR placed reliance upon the decisions of the coordinate bench of the Tribunal in assessee's own ....