TaxTMI 
TaxTMI 
2016 (7) TMI 1689
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.... 'Royalty' under Article 12 of the agreement for avoidance of double taxation between India and USA; 2. Incorrect addition of Rs. 22,67,333/- to the transfer price of the international transaction of providing user rights in software and related services (part of total addition of Rs. 5,38,88,099) The Hon'ble CIT(A) has erred on the facts and in the circumstances of the case and in law in upholding the transfer pricing adjustment of Rs. 22,67,333/- to the arm's length price of the international transaction of receipt of fees for providing user rights in software and related support services. 3. Adjudication of the transfer pricing ground by passing a non-speaking order The Hon'ble CIT(A) has erred in law by disposing off the above mentioned transfer pricing ground of appeal of the Appellant by passing a non-speaking order. 4. Transfer pricing adjustment even when the adjustment variation in the transaction value is less than 5% of the total quantum of transaction. The Hon'ble CIT(A) has erred on the facts and in the circumstances of the case and in law in upholding the transfer pricing adjustment made by ....
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....of consideration received for facilitating grant of user rights in software to Indian entities was decided against the assessee by the Tribunal in ITA No. 73/PUN/2011 relating to assessment year 2004-05, ITA No. 74/PUN/2011 relating to assessment year 2006-07, vide order dated 08.08.2013 and ITA No. 1663/PN/2011, relating to assessment year 2007-08, order dated 20.02.2015. The learned Authorized Representative for the assessee further pointed out that in the appeal filed by the assessee before the Hon'ble Bombay High Court against the said order of Tribunal dated 08.08.2013, a substantial question of law has been framed, but the decision of the Tribunal dated 08.08.2013 has not been altered by any higher authority. The Hon'ble Bombay High Court in ITA(L) No. 267 of 2014 relating to assessment year 2004-05 and in ITA(L) No. 268 of 2014 relating to assessment year 2006-07, vide judgment dated 29.01.2014 had admitted the appeal of the assessee and framed the following substantial question of law:- "a. "Whether in the facts and circumstances of the case, the Tribunal was right in holding that the income earned by the Appellant was taxable as royalty under Article 12 of....
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.... in assessee's own case, relating to assessment years 2004-05 and 2006-07. The ground of appeal No. 1 raised by the assessee is accordingly, dismissed. 8. The ground of appeal No. 3 raised by the assessee is not pressed and hence, the same is dismissed as not pressed. 9. Now, coming to the second issue raised by the assessee by way of grounds of appeal No. 2, 4 to 6 is against the addition of Rs. 22,67,333/- made to the transfer price of international transaction providing user right in software and related services. 10. Briefly, in the facts of the case, the assessee was a foreign company and was rendering services to the Indian companies, against which it had received charges for use of facilities provided to the Indian concerns. The assessee had entered into the transactions with its associate enterprises i.e. receipt of Royalty for use of Technology from CIL, receipt of dividend from CIL, receipt of licence fees from CIL and from CSSL for providing user rights in software and provision of related support services. The Transfer Pricing Officer (TPO) determined the transaction of providing user right in software and provision of related support services to be at arm&....
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....timates was an accepted method on the basis of determination of arm's length price, was not accepted by the TPO and it was held that the same was acceptable only under circumstances when actual cost allocation may not be possible. The TPO observed that where the assessee was maintaining its accounts on the basis of calendar year, it could not be closed in December and consequently, the actual cost incurred was adopted and the plea of assessee to adopt cost allocation on the cost estimate method was rejected. The TPO further was of the view that the percentage variation in actual results over estimates in respect of desktop over laptop software at global level in the hands of assessee was not material and percentage variation over cost allocation estimate was 3.8% which was less than 5%. The plea of the assessee that the contention in respect of base erosion was accepted in the past, was rejected since the principles of res judicata were not applicable to the assessment proceedings. The second contention of the assessee that the Indian Transfer Pricing Regulations were applicable to international transaction was held to be also not correct as the assessee had reported transactio....
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....he issue arising in the present appeal before us is in relation to the receipt of IT charges by the assessee from CIL and CSSL during the year under consideration. The assessee in the year consideration had provided services to the Indian entities and had received charges in respect of desktop/laptop software licence and internet mail and had determined the value of transactions by allocating cost based on cost estimates. However, the TPO adopted the actual cost incurred by the assessee in order to determine the adjustment, if any, to be made on account of international transactions. The main plea of the assessee before the authorities below was that cost allocation based on cost estimates was an accepted method for the purpose of determining the arm's length price and if the actual cost allocation results in any erosion of overall base of India, then no adjustment is required to be made to the value of international transaction. This has to be seen from the angle that where the assessee is a foreign company and is recipient of internet mail charges and desktop/laptop service charges from the Indian entities, then in cases where it is held that the assessee should have been cha....