TaxTMI 
TaxTMI 
2023 (4) TMI 673
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....acts and circumstances of the case and in law, the learned Transfer Pricing Officer("TOP‟) and the learned Assessing Officer(AO) under the directions of the Hon'ble Dispute Resolution Panel ("DRP‟) erred in making an adjustment of Rs. 18,36,63,743/- under Chapter X of the Income-tax Act, 1961 ("the Act‟) and other direct tax addition of Rs. 3,68,25,974/- under other provisions of the Act; Legal Grounds 2. On the facts and circumstances of the case and in law, the learned AO erred in not following the mandatory provisions of section 144C (13) thereby rendering the Final Assessment order as time barred. 3. On the facts and in the circumstances of the case and in law, the learned AO erred in not passing the Final Assessment Order in conformity with the Directions of the Hon'ble DRP under section 144C (5) of the Act, thereby violating the mandatory provisions of section 144C(10) and 144C(13) of the Act. Transfer Pricing Grounds Receipt of Global Information Services ('GIS')-INR 3,25,61,704 4. On the facts and circumstances of the case and in law, the learned TPO and the AO, under the directions of the Hon'ble DRP have erred in not appreciating the fac....
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.... 10,25,479 to the total income on the basis of amounts reflected in AIR. Disallowance of expenses of INR 3,58,00,495 made on account of a responses having been received from parties to whom notices under Section 133(6) of the Act were issued 12. On the facts, and in the circumstances of the case and in law, the learned AO under the directions of the Hon'ble DRP erred in disallowing the expenses amounting to INR 3,58,00,495 merely on the ground that no responses were received from parties to whom notices under Section 133(6) of the Act were Act were issued. 13. On the facts and in the circumstances of the case, the learned AO based on the directions of the Hon'ble DRP erred in not considering the relief granted by the Hon'ble DRP in case of certain parties while passing the final assessment order." 03. The brief fact of the case shows that the assessee is engaged in the business of advertising business and offer services related to advertising media planning services, marketing services, public relations etc. to its clients. As the assessee has entered into international transactions being part of Lowe worldwide group with its Associated Enterprises as assessee is ....
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....Need-Evidence-Benefit test upheld the Arm's Length Price as transaction at Rs Nil. Accordingly, on GIS Services international transaction of Rs.3,25,61,704/- was having the arm's length value of Rs. nil. 05. With respect to MSF and MNC services of Rs.12,93,98,247/- and Rs.2,17,03,792/-, the learned Transfer Pricing Officer was of the view that foreign Associated Enterprises is taken as a „tested party‟ however, supporting documents for the cost are not available. Further, assessee has failed to prove need test and benefit test in case of these services. Hence, he rejected the Transactional Net Margin Method as the most appropriate method. He also examined the documents furnished as Annexure-02 to Annexure-021 which are the email correspondence and held that same does not prove the need of the services, rendition of the services, benefit of the services etc., accordingly, Arm's Length Price of these services were considered as nil. 06. Accordingly, vide order under Section 92CA (3) of the Act the adjustment of Rs.18,36,63,743/- was proposed. 07. Based on this, the draft assessment order was passed on 26th December 2017 where the above adjustment of transfer pricing wa....
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....endition rest and benefit test. He also submitted that learned Dispute Resolution Panel has also considered the order of the learned Transfer Pricing Officer as correct based on reasons given in the direction of the learned Dispute Resolution Panel for earlier years. He submitted that the matter reached the co-ordinate Bench in case of the assessee for A.Y. 2010-11, 2011-12 and 2013-14. The first order of the co-ordinate Bench where all these services are covered and firstly for A.Y. 2010-11 in ITA No. 1156/Mum/2015 dated 12th June 2019, the co-ordinate Bench in paragraph no. 8 following the decision of the Hon'ble Bombay High Court in case of CIT vs. Johnson and Johnson in ITA No. 1030 of 2014 dated 7th March 2017 deleted the addition. He further submitted that for A.Y. 2011-12 to 2013-14 in ITA No. 2075, 1762 and 890 dated 7th August 2019, the identical issue was there, followed its earlier order and deleted the addition. Therefore, according to him, the issue is squarely covered in assessee's own case for earlier years. 011. For the current year independently, he first referred to the transfer pricing study report prepared by the assessee and submitted that GIS Intra Group ....
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....nterprises and the assessee are rejected by the learned Transfer Pricing Officer holding that it neither proves rendition of services nor proves any benefit accruing to the assessee. He submitted that the approach of the learned Transfer Pricing Officer is unwarranted. If he is not satisfied with the email exchanges are proves exhaustively the services, he is duty bound to inform the assessee what else proof/ evidence are required. 013. In the end, he submitted that the issue is squarely covered in favour of the assessee by the orders of the co-ordinate Bench in assessee's own case for earlier years and there is no change in the facts and circumstances of the case, the addition deserves to be deleted. 014. He further submitted that nevertheless independently for this year the document showing rendition of services, benefit of such services is proved. Therefore, the addition deserves to be deleted. 015. The learned Departmental Representative vehemently supported the order of the learned Transfer Pricing Officer. He submitted that assessee has failed to show rendition test and benefit test therefore, the arm's length price of the international transaction is held to be nil. He su....
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....se services are required for the business of the assessee, therefore, they were requisitioned by the assessee from its Associated Enterprises. The Associated Enterprises has rendered those services as agreed upon as per agreement between the parties. On rendition of such services, assessee has been benefited. There is no standard requirement of providing manner of maintenance of documentation. The basic document would be the services agreement between the parties which will demonstrate the right and obligation of the parties, nature of services, nature of reporting, the manner of billing along with documentary evidences. Further, when the assessee would be requiring such services, according to agreement he would be asking the provider of services to provide such services, on provision of such services there would be time sheets, log sheets, the job cards, etc. This would have been signed off by the recipient of the services and the provider of the services. Naturally, if the respondent of the services is not benefited by receipt of such services, in the ordinary course of business, nobody would have paid any sum to the associated enterprises. Therefore, the benefit test is a necess....
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.... be examined every year. 020. With respect to the orders of the co-ordinate Bench of earlier years, they are not determinative of the issue before us in the present assessment year for the purpose of requirement of services i.e. need test, whether the services are rendered or not, i.e. rendition test, benefit test etc. in the case of the assessee for assessment year 2000 - 11 in ITA number 1156 - 1187/M/2015 the coordinate bench has decided the identical issue as per order dated 12/6/2019 wherein the learned transfer pricing officer made ad hoc percentage as arm's-length price of these services, coordinate bench following the decision of Honourable Bombay High Court in case of CIT vs Johnson & Johnson Ltd in ITA number 1030 of 2014 dated 7/3/2017 allowed the appeal of the assessee on this technical aspect and dismissed the grounds raised by the revenue also on the technical aspect. Similarly for assessment year 2011 - 12, 2012 - 13 and 2013 - 14. As per order dated 7/8/2019. The ITA T followed the order in the case of the assessee for assessment year 2010 - 11. In the present case before us, there is no disallowance made by the learned transfer pricing officer, we have categorical....
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....ine the same for determination of the arm's-length price. Accordingly, ground number 4 - 10 of the appeal of the assessee is allowed with above direction. 024. Ground number 1 - 3 are general in nature, therefore, same are dismissed. 025. Ground number 11 is with respect to the addition of Rs. , 10,25,479 made to the total income of the assessee based on amounts reflected in annual information return. The learned assessing officer has noted that as per annual information return there are several entries of receipts, which has not reported by the assessee in its books of accounts. These entries were found. With respect to the commission income of the assessee. Before the lower authorities, assessee could not explain the same satisfactory and therefore the learned assessing officer made the addition of Rs. 10,25,479 to the total income of the assessee. Before the learned dispute resolution panel. The assessee submitted that assessee is carrying on the business of an advertising agency which works on principal to agent basis with its clients. The assessee is engaged in the activities of release of advertisements on behalf of its clients and production of advertisement for clients. T....
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.... assessing officer for proper examination. Necessary enquiries, if possible, may also be carried out. 027. Ground number 12 - 13 of the appeal of the assessee is with respect to the addition of Rs. 35,800,495 merely on the ground that no response was received from the parties to whom notices u/s 133 (6) of the act were issued. The fact shows that the learned AO verified the claim of the expenses of the assessee as per paragraph number 6 of the assessment order. Based on such explanation for expenses. The learned AO issued notices u/s 133 (6) of the act. Accordingly, in case of 21 parties. The notices u/s 133 (6) were served or not responded to, or not served. The amount of expenditure involved therein was disallowed by the learned assessing officer. Assessee submitted before the learned assessing officer that all the expenses are genuine and further the assessee has deducted tax at source, wherever applicable, the payments have been made to the parties either by electronic bank transfer or by account payee cheques. The company submitted copies of form number 16 A & invoices received from the specified parties. It was also the claim of the assessee that the expenditure has been inc....
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.... Further, it is not the case of the assessee that they have not deducted tax at source on payment made to most of the parties. To support it, assessee has produced form number 16 A. Before the learned AO. That form also contains the permanent account number of the parties to whom the payments have been made. In view of this, we do not find any reason to sustain the disallowance. Accordingly, same is deleted. Thus, ground number 12 and 13 of the appeal are allowed. 031. Accordingly appeal of the assessee in ITA number 398/M/2019 for assessment year 2014 - 15 is partly allowed with above direction. ITA No. 595/MUM/2022 for Assessment Year 2017-18 032. This appeal is filed by the assessee against the assessment order passed u/s 143 (3) read with Section 144C (13) read with Section 144B of the income tax act for assessment year 2017 - 18. On 3/2/2022. 033. Assessee has raised following grounds of appeal: - "General 1. On the facts and in the circumstances of the case aid in law, the learned Transfer Pricing Officer („TPO‟) and the learned Assessing Officer ("AO‟) under the directions of the Hon'ble Dispute Resolution Panel ("DRP‟) erred in making an adj....
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....s INR 44,51,774 8. On fact and circumstances of the case and in law the learned TPO and the lamed AO, under the directions of the Hon'ble DRP have erred in not following Hon'ble Tribunal's ruling in Appellant own case for AV 2010-11 AY 2013-14 in relation to above international transactions, more so considering that there is no change in fact as compared to the said years. 9. On facts and circumstances of the case and in law, the learned TPO and the AO, under the directions of the Hon'ble DRP and is not following Hon'ble DRP's directions for previous years in relation to above international transactions, in spite of there being change in facts. 10. On facts and canon of the case and in law, the learned TPO and the AO, under the directions of the Hon'ble DRP have erred in not appreciating the factual details, submissions and various documentary evidence's which demonstrate receipt of services by the Appellant. 11. On facts and circumstances of the case and in law, the learned TPO and the AO, under the directions of the Hon'ble DRP have erred in rejecting the Transaction Net Margin Method (TNMM) method, as the most appropriate method is benchmarking this tr....
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..... On the facts and circumstances of the case and in law, the learned Assessing Officer has erred in initiating penalty proceedings u/s. 270A of the Act." 034. The brief facts of the case that assessee has filed the return of income for assessment year 2017 - 18. On 30/11/2017 declaring income of Rs. 723,788,650. As assessee has entered international transaction of Rs. 194,826,100/- which was referred to the learned transfer pricing officer of several services, arm's-length price of the same has been determined by the learned assessing officer at Rs. nil and therefore addition to that extent was made to the total income of the assessee. There was a difference in income reported as per form number 26AS and the books of accounts amounting to Rs. 10,79,303/- which remained unreconciled and therefore addition to that extent was also made. Accordingly, the total income of the assessee was computed at Rs. 935,694,283. 035. Ground number one of the appeal is general in nature, no arguments were advanced, covers the additions, which are also covered by the other grounds of appeal. Therefore, same is dismissed. 036. As per ground number 2 - 15 are in relation to the arm's-length price of ....