AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 106
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....nue") erred in making an adjustment of INR 63,67,777 to the total income of the Appellant on account of the difference in the arm's length price ('ALP') of its international related party transactions under the provisions of Section 92CA(4) of the Act. 2. On the facts and circumstances of the case, the Revenue has grossly erred in disallowing mark-up charged by the associated enterprise ("AE") in providing intra group services to the Appellant without providing any cogent reason thereof. In doing so, the Revenue has erred in: 2.1 Concluding that 88% of the cost incurred by the AE is third party cost which entirely contradicts the fact that 98% of the cost incurred by the AE is incurred in-house. 2.2 holding that indirect costs forming part of the total cost base as profit mark-up and disallowing the same without providing any cogent reasons thereof . 2.3 Disallowing profit mark-up charged by the Appellant's AE assuming no value addition by the AE in providing services and disregarding comprehensive documentary evidence furnished by the Appellant demonstrating such value addition. In doing so, the Revenue erred in concluding that entire cost is th....
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....Act on or before the due date amounting to INR 8,96,920. 8. The Ld. AO has grossly erred in disregarding the rectification application filed against the erroneous adjustments proposed in the intimation under section 143(1)(a) and in not providing any opportunity to the Appellant to submit further submission/ details and explanations in this regard. 9. On the facts and circumstances of the case, Ld. AO has grossly erred in granting short deduction under section 80G of INR 9,62,500. 10. On the facts and circumstances of the case, Ld. AO has grossly erred in granting short deduction of taxes deducted at source of INR 5,25,600. General 11 On facts and in law, the Ld. AO erred in initiating penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income." 4. In ITA No. 562/Del/2022, following grounds have been raised by the assessee: "1. On the facts and circumstances of the case and in law, the Honourable Dispute Resolution Panel ('Hon'ble DRP), the Learned Transfer Pricing Officer ('Ld. TPO') and the National Faceless Assessment Centre / Assessing Officer (hereinafter collectively to be referred as "....
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....16-17) in the Appellant's own case and there being no change in the facts and circumstances of the case in AY 2018-19 vis-a-vis the aforesaid years. 6. On a without prejudice basis, on the facts and circumstances of the case, the Revenue has incorrectly computed the transfer pricing adjustment as INR 12,603,272 amounting to INR 11,252,922. Pertaining to Corporate Tax Matters 7. On the facts and circumstances of the case, the Ld. AO has grossly erred in granting short deduction of taxes deducted at source of INR 1,13,368. 8. On the facts and circumstances of the case, the Ld. AO has grossly erred in levying consequential interest under Section 234B and Section 234C in the final assessment order dated 9 March 2022. General 9 On facts and in law, the Ld. AO erred in initiating penalty proceedings u/s 270A of the Act for furnishing inaccurate particulars of income." 5. At the outset, the ld. AR submitted that out of all the grounds filed, the assessee would be contesting the grounds pertaining to ALP adjustment of made by the AO on account of profit mark-up. 6. Brief facts relating to this issue are that the assessee obtained ....
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....es. Before the ld. DRP, it was submitted that the whole premise on which the TPO has disallowed 12% [overhead cost (7%) and profit markup (5%)] is based on assumption that the underlying cost are third party costs, which is incorrect as demonstrated as follows: Nature of Cost In-house/ Third party Cost (without markup) % to Total Cost Remark Employee Cost (IT Staff) In-house EUR 1.17 million (INR 9.18 cr.) 98% Recharged to BMW India FS with markup IT Infrastructure cost License Cost In-house Third Party EUR 28,306 (INR 0.22 cr.) 2% Recharged to BMW India FS at cost 9. It is further submitted that 5% mark-up policy finds support in multiple international guidance as the nature of services received are a mix of high end and low end services. It was argued that EU Joint Transfer Pricing Forum suggests a markup of 5% for low value adding services which includes IT services as well. It was further argued that the illustrative list of LVIGS in Para 7.49 of BEPS Action Plan 8-10: 2015 Final report ('Action Plan') includes certain IT support services and Para 7.61, thereof suggests that a markup of 5% would be appropriate on such serv....
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.... indirectly attributable costs, which are needed to provide the service are considered which are, budget costs, cost of financing or leasing, costs for company internal like cost of premises, electricity costs etc., and external subcontracting and Administration/cross-departmental costs. 15. For providing the IT support services to BMW FS, the costs incurred by BMW Group were recharged to the Company along with a margin /mark-up of 5%. It is to be noted that BMW Group recovered from BMW FS, the costs incurred by it in relation to IT support services, which inter alia, also included the purchase cost of certain IT products/licenses from third parties. In this regard, it is pertinent to note that the cost of external licenses purchased by the Group is allocated without a mark-up. On perusal of the invoices, we find that there are certain terminologies used at the time of rising of invoices like IT services or communication costs. While these terminologies define the category of 'service' availed from BMW AG, there is a further sub-set of these services, which in turn has a further 'service type' . Accordingly, based on the nature of service availed by the Assessee, appropriate amo....