TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 1386
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....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 by: Shri Surender Pal, CIT (DR) Both sides have been heard at some length. The preliminary point ....
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....ies, 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 on which the order of the Tribunal was served and whether any appeal has been filed. On 30th July, 2021 the ld. DR had received report from the Assessing Officer dat....
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....icant 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 vide Agreement dated 1st June, 2014 for which assessee had paid total consideration of Rs. 45,48,85,303/- which comprised of net asset value of Rs. 1,72,93,846/-. The difference between the considerations a....
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....s. 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 the benefits stated to have been received were tangible or real and that a facade was created to give an impression that some vital benefit had passed on to the taxpayer, which was not the case in reality. According to the TPO, related parties were quite likely to....
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....sputed 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 a year, two or even five methods can be adopted. This would spell chaos and be determined to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the TNMM had to be applied by the TPO/AO in respect of the technical fee p....
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....r 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 that when conditions are made or imposed between two associated enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises then any profit which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, if not so accrued, may be in....
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....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 entirety (and not simply by reference to pricing) to those that might reasonably have been expected had the transfer of property been the subject of a transaction involving independent enterprises. Thus, in the case described above it might be appropriate for the tax administration, for example, to adjust the conditions of the agreement in a commercially rational manner....
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....hould 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 expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits was erroneous. It has been classically o....
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....xpenditure 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 quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in t....
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....me. 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 acquiring of Corporate Travel ('CT) division of American Express India Pvt. Ltd. ('AEIPL') on 'slump sale' as a going concern basis vide Local Business Transfer Agreement ('LTBA') dated June 1, 2014. 3.2.1 According to the Assessing Officer, depreciation claimed by the assessee on goodwill was not an allowable deduction since the goodwill recognized was self generated. According to him, the assessee and AEIPL were under the same ul....
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....sallowance 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 2015-16 and was decided in favour of the assessee in the following words: "33. Next disallowance relates to claim of bad debts amounting to Rs. 2,25,26,524/-. 34. Facts relating to this grievance show that in the acquisition of corporate travel division, the assessee had also acquired receivables of Rs. 37.04 crores besides other assets and liabilities. Out of these receivables, the assessee was unable to recover Rs. 2.25 crores from certain parties. The same was written off as bad debts in the profit and loss account.....