TaxTMI 
TaxTMI 
2022 (1) TMI 1386
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.... of expenses in respect of bad debts written off amounting to Rs. 22,96,719/-. 3. At the outset, the ld. Counsel for the assessee submitted that, all the three issues involved are covered by the decision of the Tribunal in assessee's own case for the assessment year 2015-16 vide judgment order dated 31st January, 2020. This fact he pointed out, has also been noted by the ld. DRP in its order, wherein DRP has clearly held that all the issues involved are squarely covered by the decision of the Tribunal for assessment year 2015-16 and in fact directed the TPO/AO to verify from the record whether any appeal has been preferred against the order of the Tribunal for assessment year 2015-16; and if no appeal has been preferred then in case the ITAT's order has not been challenged before the Hon'ble High Court, then additions should be deleted. 4. This fact was confronted to the ld. DR vide order sheet entry dated 24.05.2021 during hearing of Stay Application filed by the assessee, which for the sake of ready reference is reproduced hereunder:- "24.05.2021 Appellant by : S/Shri Himanshu S. Sinha, Adv. & Bhuwan Dhoopar, Adv. Department b....
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....e Hon'ble High Court. In order to impart certainty and finality to the litigation and noting the submissions of the parties, it is desired that the status of the process of filing of appeal of the Revenue before the Hon'ble High Court against the order of the Tribunal for AY 2015-16 (Supra) is brought on record. For this purpose, the Ld. CIT (DR) seeks time to ascertain the position from the Field Office. Accordingly, the Department is allowed time to ascertain the status of the process of filing of appeal for A.Y. 2015-16, before the next date of hearing i.e. 11.06.2021. In the meanwhile, the status quo on the recovery of the demand be maintained and the accompanying Stay Application shall also come up on 11.06.2021 alongside the Appeal. The Registry is directed to post the matters for 11.06.2021 as Part Heard. The above decision was pronounced in the presence of both the parties in the Open Court through virtual hearing on 24.05.2021. Sd/- ( AMIT SHUKLA )JUDICIAL MEMBER Sd/- ( G.S. PANNU )VICE PRESIDENT " 5. Thereafter same directions were reiterated from time to time as ld. DR sought time to verify the date ....
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....thod to determine the NIL mainly on the following reasons:- * The assessee has failed to provide any cogent evidence to demonstrate that services were received by the Applicant and it is only a clandestine methodology adopted for collusion to shift the profits from Indian territory. * He held that the assessee has failed to establish any direct nexus between increase in business and profitability as a result of availing of these services. * It was held that the assessee did not gain any advantage or benefit as a result of availing of these services, therefore the whole purpose of receiving these services is defeated. * TPO further held that the Applicant itself was performing these services, hence there was no need for the Applicant to avail services from its AEs. 9. Regarding the issue of depreciation of claim of goodwill the Assessing Officer had simply followed his predecessor's order for the immediately preceding assessment year 2015-16 which has been depreciation of Rs. 8,20,48,398/- on the goodwill applying in the books of accounts as a result of sales transaction. The assessee had purchased corporate transfer business from AEIPL vid....
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.... very carefully considered the grounds of objections and written and oral arguments made on behalf of the assessee. The decision of the Panel on various objections is as follows: 3.1 Ground No. 1 to 6 relate to the transfer pricing adjustment of Rs. 243,304,705 in respect of transaction of availing of transitional support services. It was submitted that as part of a spin off exercise in the group, a number of functions that supported the travel business altogether, shifted from Amex to GBT, whereas some of those continued to operate under Amex. Due to the fact that certain expertise supporting the travel business shifted out of Amex and other remained therein, Amex and GBT BV entered into a master TSA transition services agreement ('Master TSA') wherein Amex agreed to provide certain transition services to GBT BV, and correspondingly, agreed to received certain services from GBT BV to ensure that continuity of business was maintained even after the spin-off, till the time when both organizations reconstructed such expertise in-house. 3.1.1 The TPO, however, after a detailed analysis of the transitional support services came to the conclusion that none of t....
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....nt findings of the Hon'ble High Court read as under: 17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in respect of all the international transactions including payment of royalty. The TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of Rs. 38,58,80,000 only for which Comparable Uncontrolled Price ("CUP") method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e. payment of technical assistance fee, to an entirely different (CUP) method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international ITA 350/2014 Page 20 transaction by. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for....
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.... under CUP is prescribed in clause (a) of the sub-rule (1) of Rule 10B(1). The following three steps have been prescribed: - "(a) comparable uncontrolled price method, by which, (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified. (ii) such price is adjusted to account for differences, if any, between the international transaction and the comparable uncontrolled transactions or between the enterprises entering into such transactions, which could materially affect the price in the open market; (iii) the adjusted price arrived at under sub-clause (ii) is taken to be an arm's length price in respect of the property transferred or services provided in the international transaction;" 16. The Organization for Economic Co-operation and Development ("OECD", for short) has laid down "transfer pricing guidelines" for Multi-National Enterprises and Tax Administrations. These guidelines give an introduction to the arm's length price principle and explains article 9 of the OECD Model Tax Convention. This article provides ....
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....e borrowing company, the investment would not be expected to be structured in this way. In this case it might be appropriate for a tax administration to characterize the investment in accordance with its economic substance with the result that the loan may be treated as a subscription of capital. The second circumstance arises where, while the form and substance of the transaction are the same, the arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner and the actual structure practically impedes the tax administration from determining an appropriate transfer price. An example of this circumstance would be a sale under a long term contract, for a lump sum payment, of unlimited entitlement to the intellectual property rights arising as a result of future research for the term of the contract (as previously indicated in paragraph 1.10). While in this case it may be proper to respect the transaction as a transfer of commercial property, it would nevertheless be appropriate for a tax administration to conform the terms of that transfer in their enti....
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....input in the present case in judging the action of the TPO. In fact, the CIT (Appeals) has referred to and applied them and his decision has been affirmed by the Tribunal. These guidelines, in a different form, have been recognized in the tax jurisprudence of our country earlier. It has been held by our courts that it is not for the revenue authorities to dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. We may refer to a few of these authorities to elucidate the point. In Eastern Investment Ltd. v. CIT, (1951) 20 ITR 1, it was held by the Supreme Court that "there are usually many ways in which a given thing can be brought about in business circles but it is not for the Court to decide which of them should have been employed when the Court is deciding a question under section 12(2) of the Income-tax Act". It was further held in this case that "it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned". In CIT v. Walchand & Co. etc., (1967) 65 ITR 381, it was held by the Supreme Court that in applying the test of commercial expe....
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.... the above decisions is that it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the paragraphs which we have quoted above. 22. Even Rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quan....
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....cordingly, the substantial questions of law are answered in the affirmative and in favour of the assessee and against the Revenue. The appeals are accordingly dismissed with no order as to costs. 19. Considering the facts of the case in totality in light of the judicial decisions referred to hereinabove, we do not find any merit in the TP adjustment of Rs. 33,10,68,560/-. The Assessing Officer/TPO is, accordingly, directed to delete the same. Grounds relating to TP adjustments with all its sub-grounds are allowed." 3.1.3 The Panel, accordingly, directs the TPO/AO to verify from their records and see whether any appeal has been preferred against the aforesaid ITAT order for AY 2015-16 in assessee's own case and exclude the said addition on account of transitional support services, if no appeal has been preferred. The TPO/Assessing Officer-however will retain the addition, if this order of the ITAT for A.Y. 2015-16 has been challenged before the High Court or the Supreme Court as the case may be. 3.2 Ground No. 7 relates to the disallowance of Rs. 82,048,398 on account of depreciation on goodwill acquired/purchased and capitalized in books of account on....
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.... 3.2.3.1 The Panel, accordingly, directs the AO to verify from its records and see whether any appeal has been preferred against the aforesaid IT AT order for AY 2015-16 in assessee's own case and exclude the said addition on account of depreciation on goodwill, if no appeal has been preferred. The AO, however, will retain the addition, if this order of the TTAT for AY 2015-16 has been challenged before the High Court or the Supreme Court as the case may be. 3.3 Ground No. 8 relates to the disallowance of bad debts of Rs. 12,296,711. 3.3.1 The assessee had written off bad debts amounting to Rs. 12,296,711 as irrecoverable in its books of account during the previous year. Such bad debts were taken into account in computing the income of the previous year and earlier previous year. The AO had held that deduction of such bad debts would not be allowed to the assessee, inter-alia on the ground that supporting evidence in relation to bad debts were not furnished and the quantum of bad debts was unreasonable considering that it was the second year of operations. 3.3.2 The Panel has considered the submission. This issue had also travelled to ITAT for AY....