TaxTMI 
TaxTMI 
2023 (5) TMI 1295
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....broad range of production facilities. 2.2. Assessee filed its return of income on 30.11.2017 declaring total income of Rs.90,94,42,450/-. The case was selected for complete scrutiny and notice u/s. 143(2) was issued to assessee along with questionnaire in notice u/s. 142(1). The Ld.AO noted that for the year under consideration, assessee had international transactions with its associated enterprises that exceeded Rs. 15 crores. Accordingly, a reference was made to the transfer pricing officer for determining the arm's length price of the international transaction undertaken by assessee. 2.3. On receipt of the reference, the Ld.TPO called upon assessee to furnish the economic details of the international transaction in form 3CEB. On receipt of the details filed by the assessee, the Ld.TPO noted that assessee had following international transactions with its AE. 2.4. The Ld.TPO noted that assessee used TNMM as the most appropriate method for manufacturing and trading segments and adopted combined transaction approach under the manufacturing segment. 2.5. The PLI was selected to be OP/OC. The assessee thus computed its margin under manufacturing segment to be 7.8% and trad....
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....4. In respect of the payment reimbursed by assessee to the AE towards salary expenses of the expat expatriate employees, the DRP upheld that it fall within the ambit of fee for technical services and therefore TDS ought to have been deducted u/s. 195 of the act. 2.15. The DRP thus upheld the disallowance made by the Ld.AO, u/s. 40(a)(i) of the act. On receipt of the DRP directions, the Ld.AO passed the impugned order by making an addition in the hands of assessee at Rs.17,31,94,360/-. Aggrieved by the order of the Ld.AO, assessee is in appeal before this Tribunal. 3. The Ld.AR submitted that Ground nos. 1 to 5 are general in nature and therefore do not require any adjudication. 4. In Ground no. 6 - The Ld.AR submitted that sub-ground (c) &(d) are the comparables that the assessee is seeking inclusion/exclusion under the manufacturing segment. He submitted that Ground no. 6(a) - (b) are general in nature and therefore do not require adjudication. Before we undertake the comparability analysis, it is sine qua non to understand the FAR performed under manufacturing segment by the assessee before us: Functions: Under the manufacturing/ systems segment, Yokogawa ....
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....Ground No.6(c): The Ld.AR submitted that, the three comparables sought for inclusion under the manufacturing segment are a) Amtech Electronics (India) Ltd. b) Continental Controls Ltd. c) Supernova Engineers Ltd. 4.2. The Ld.AR submitted that all the 3 comparables passes through the filters applied the Ld.TPO. It is also submitted that in case of Supernova Engineers Ltd., the Ld.TPO had not raised any objections except for mentioning that it is functionally not similar. 4.3. It is the submission of the Ld.AR that all the 3 comparables are engaged in manufacturing activities of various products. He submitted that assessee is also into manufacturing of various components and is involved in providing end to end solutions as has been observed by the Ld.TPO while narrating the profile of the taxpayer at page 6 of the order u/s. 92CA. 4.4. He thus submitted that, the reasoning adopted by the DRP to reject inclusion of the 3 comparables do not have any basis. He thus submitted that the comparables may be remanded to the Ld.AO/TPO for reconsideration based on the FAR. 4.5. On the contrary, the Ld.DR though could not controvert the submissions of the L....
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....ectrical measuring instruments. (b) The Ld.AR submitted that the only observation by the DRP to include this company is by stating that it is engaged in manufacturing of control panel for machines and also provides automation solutions for industrial plants which is not correct as per the annual report. The Ld.AR thus submitted for exclusion of this comparable. The Ld.DR on the contrary submitted that the filters applied by the Ld.TPO does not include the export income filter and therefore the fact that this company do not have any export income is of no relevance. He thus submitted that this company is into manufacturing of control panels that are used in machines and accordingly deserves to be included. We have perused the submissions advanced by both sides in the light of records placed before us. (c) We note that this company as per the corporate information given at page 2525 of paper book is engaged in manufacturing of control panels for machines and installation, erection of machines. In the profit and loss account, the revenue from operations are from sale of products and sale of services. It is nowhere into manufacturing of any automation equipments / ins....
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....o ascertain whether the manufacturing activity is comparable with that of assessee. In the event, the product manufactured is more or less similar with that of assessee and the same may be retained. Accordingly this comparable is remanded back to the Ld.AO/TPO for necessary verification in accordance with the directions hereinabove. III) Dembla Valves Ltd. (a) The Ld.AR submitted that this company is engaged into manufacturing of various types of valves catering to oil, gas, petrochemicals, power, water treatment and distillation, steel, electricals, pharma, paper and pulp industries. He thus submitted that this company is functionally not similar with that of assessee as the industry to which this company caters is to be as compared to the assessee. He also submitted that even the product manufactured do not match or is not even similar in nature with that of assessee. (b) On the contrary, the Ld.DR submitted that assessee is using TNMM as the method to determine ALP and therefore there is no requirement to match the products manufactured thereby narrowing down the perspective of the comparability. He thus supported the inclusion of this comparable. We have....
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....ricing' and 'Transfer Pricing Adjustments' made by the concerned authorities below. We consider it appropriate to quote from the order of Tribunal rejecting the Application seeking a review before Tribunal as hereunder:- "7. We have heard the learned Departmental Representative as well as learned Authorised Representative and considered the relevant material on record. At the outset, we note that the TPO has applied the filter of 25% RPT whereas the assessee has contended that the filter of revenue from RPT should be applied at 15% instead of 25% applied by the TPO. The learned Departmental Representative has submitted that there is no standard rule for applying the filter of 15% regarding the RPT. It is pertinent to note that the ALP as per the provisions of the TP has to be determined by considering uncontrolled comparable prices and therefore only unrelated prices have to be taken into account to bench marked international transactions. However, 0% RPT of the comparable price is an impossible situation and therefore a reasonable tolerance range from revenue from RPT can be considered for selecting uncontrolled comparables. There is no dispute that there cann....
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....(Prl. Commissioner of Income Tax & Anr. Vs. M/s. Softbrands India Pvt. Ltd.,) has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. 5. The relevant portion of the said judgment is quoted below for ready reference: "Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answeri....
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....ction. The Hon'ble Karnataka High Court in its Judgment 28-6-2018 in Pr. CIT v. Yodlee Infotech (P.) Ltd. [IT Appeal Nos. 684 and 685 of 2017, dated 28-62018] had to consider among other questions of law the following questions of law with regard to application of RPT filter, viz., Whether on the facts and in the circumstances of the case, and in law, the Tribunal was justified by not acknowledging its own orders where the Tribunal has held in stretching RPT% from 15-20% in case of Katera Software India Pvt Ltd? and Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that RPT filters should be 15% and not 25%, taken by the TPO?. The Hon'ble Court held as follows: '3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-assessee, has given the following findings against Revenue with regard to various issues raised before it with regard to 'Transfer Pricing' and 'Transfer Pricing Adjustments' made by the concerned authorities below. We consider it appropriate to quote from the order of Tribunal rejecting the Application seeking a review before Tribun....
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....e than 15% of total revenue. In view of the facts and circumstances of the case when good number of comparables available, then we are of the considered opinion that the RPT filter of 15% is proper in the case of the assessee. By applying this filter of 15% RPT, we modify the impugned order of the CIT (Appeals) and therefore only one company namely Four Soft Limited will be excluded from the said comparable having more than 15% RPT. Accordingly, we direct the A.O./TPO to exclude the Four Soft Ltd. Having 19.89% of RPT." . 4. This Court in ITA No. 536/2015 C/w ITA No. 537/2015 delivered on 25-6-2018 (Prl. Commissioner of Income Tax & Anr. v. M/s. Softbrands India Pvt. Ltd.,) has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. ...... ... ... ... ... ... 5. The relevant portion of the said judgment is quoted below for ready reference: "Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair ....
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....w that the facts of the Assessee's case is similar to the case decided by the Hon'ble High Court and in the light of the aforesaid decision of the Tribunal which has been upheld by the Hon'ble Karnataka High Court, the RPT filter has to be applied adopting the threshold limit of 15%. We hold and direct accordingly." (f) In case of Barracuda Networks India Pvt. Ltd. vs. DCIT reported in (2021) 131 taxmann.com 337, this Tribunal has followed the above decision of Hon'ble Karnataka High Court and has held that the RPT filter has to be applied by adopting the threshold limit of 15%. (g) We accordingly direct the Ld.AO/TPO to verify the RPT filter of these three comparables and to apply it at threshold limit of 15%. In the event, the RPT of these three comparables exceed 15%. The comparables will stand excluded. Accordingly these 3 comparables are remanded back to the Ld.AO/TPO for necessary verification considering the directions hereinabove. Accordingly ground no. 6(d) r.w. ground nos. 8-10 stands allowed. 6. Ground no.7 is in respect of not considering Swati Switchgears India Pvt. Ltd. as a comparable. The Ld.AR submitted that the....
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.... improvements 161.03 Total 5443.37 The assessee also owns intangible assets relating to marketing such as trade marks, trade named, brand names, logos etc. It also owns customer rated intangible such as customer lists, customer contracts, customer relationship, open purchase orders. It also wens Goodwill related to the intangibles such as institutional goodwill, professional practice goodwill, personal goodwill of professional, celebrity goodwill, etc. Risk Assumed: Type of risks Yokogawa India AEs Business risk / Market risk Yes Limited Contract risk Yes Limited Price risk Yes Yes Foreign exchange risk Yes Yes Product liability risk Yes Limited Credit and collection risk Yes No Characterisation: Trading activity: Based on the results of the functional, risk and asset analysis, Yokogawa India can be characterized as a distributor bearing market risks and performing functions undertaken by an independent distributor. 7.2. Based on the above we shall undertake the analysis of comparable sought for inclusion/exclusion by the assessee under the trading segment. 8. Ground no. 12 - The ....
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....ng of gas trains/gas pressure reducing stations, motorized dampers and trading of gas filters, gas pressure regulators etc. (ii) The Ld.AR submitted that the trading activity by this company is only in respect of small component used in safety equipments like gas filters, gas pressure regulators and gas valves etc. thereby making it functionally not similar with that of assessee. He submitted that the assessee is into trading of finished products in the nature of transmitters, recorders, flow meters, oscilloscopes, digital power analysers, optical spectrum analysers etc. from its AEs for resale to unrelated parties. It is further submitted that there is no value addition carried out by the assessee in the trading segment in respect of the products sold. (iii) He thus submitted that there is no similarity in the functions under the trading segment by assessee as well as the comparable company. (iv) On the contrary, the Ld.DR relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. (v) We note that assessee is also into sale of finished goods without any value....
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....CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 11.5. Chapters I and III of OECD Transfer Pricing Guidelines contain guidelines on comparability analyses for transfer pricing purposes. Guidlines on adjustments to be provided is found in paragraphs 3.47-3.54 and in the Annex to Chapter III. The guidelines must be followed for computing arm's length principle, and for comparing comparable uncontrolled transactions. Reasonably accurate adjustments should be made to eliminate effect of any such differences. 11.6. Paragraphs 13 to 16 of OECD guidelines, emphasizes need for working capital adjustment in terms of receivables and payables as under: "13. In a competitive environment, money has a time value. If a company provided, say, 60 days trade terms for payment of accounts, the Price of the goods should equate to the price for immediate payment plus 60 days of interest on the imm....
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....these payment terms and compensate for the timing effect. A company with high levels of inventory would similarly need to either borrow to fund the purchase, or reduce the amount of cash surplus which it is able to invest. Making a working capital adjustment is an attempt to adjust for the differences in time value of money between the tested party and potential comparables, with an assumption that the difference should be reflected in profits. Methodology to compute working capital adjustment is given in Paragraphs 13 to 16 of the aforesaid OECD Guidelines (supra). These guideline also indicate factors that needs to considered like; 11.8. The point in time at which the Receivables, Inventory and Payables should be compared between tested party and comparables, and whether it should be the figures of receivables, inventory payable at the yearend or beginning of the year or average of these figures that should be considered;, 11.9. In the matter of determination of Arm's Length Price, it cannot be said that the burden is on the assessee or the Department to show what is the Arm's Length Price. The data available with the assessee and Department should be the starting p....
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....supra). 11.13. Based on the above discussions, and respectfully following decision of coordinate Bench of this Tribunal in the case of Huawei Technologies India (P.) Ltd. (supra), we direct working capital adjustment to be computed and to allow as per actual, after considering exclusion/inclusion of comparable companies in the final set of comparables as discussed hereinabove. Accordingly Ground no. 16 raised by assessee stands allowed. 12. Ground nos. 17-19 has been raised by assessee against the addition made on global sales and marketing activity expenses incurred by assessee to be in the nature of AMP spent. 12.1. The Ld.AR at the outset submitted that this issue stands squarely covered by the order of Hon'ble High Court in assessee's own case for A.Y. 2010-11 in ITA No. 940/2017 by order dated 28/08/2018. The Ld.AR referred to pages 5691-5698 of the paper book wherein the order of the Hon'ble High Court is placed. 12.2. At page 5692, following substantial questions of law was framed by Hon'ble High Court. "Whether the Hon'ble Tribunal is justified in setting aside the determination of Arms Length Price done by assessing authority and has directed the as....
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....r illegality in the directions of the DRP however having regard to the peculiar facts and circumstances of the case wherein the assessee is having multiple and diversified international transactions involving receipt as well as payment, we are of the considered view that the payment in respect of management fees as well as Global Sale and Marketing Activity Fees shall be considered as operating cost and has to allocated in the ratio of turnover of the other international transactions and then the ALP of the other international transactions has to be determined under TNMM analysis. Hence we set aside the entire issue of determination of ALP and TP Adjustment to the record of the TPO/A.O. for carrying out fresh exercise of determination of ALP in respect of international transactions by considering the payment in respect of management fees and Global Sale and Marketing Activity Fees as part of the operating cost and allocating the same in the ratio of the turnover of the other international transactions." 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. -v- M/s Softbrands India Pvt....
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....fficient reason to invoke Section 260-A of the Act before this Court. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs." 5. Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs." 12.4. The Ld.DR on the contrary relied on the observations by the DRP. We have perused the submissions advanced by both sides in the light of records placed before us. 12.5. As the issue has been decided in favour of assessee by Hon'ble High Court upholding the view taken by the Tribunal, it has been reproduced in para 3 of the order of the Hon'ble High Court (supra). Respectfully following the same, we are of the view that the expenditure incurred by assessee towards global sales and marketing activity has to be treated as operating cost and has to be allotted in the ratio of the turnover of the other international transaction for determining the ALP under TNMM analysis. Accordingly ground nos. 17-19 raised by as....
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....he legal position being erroneous, the only conclusion that could be arrived at is to allow the application. 34. Though the Revenue has raised numerous contentions that further information is required to record a detailed finding, such stand is taken up for the first time in the present proceedings A perusal of the file of the Department does not make out any instance where the Department had sought for further information which was not furnished On the contrary, the petitioner has made out detailed representation on the legal position and record does not reflect any requisition for further information remaining unanswered In fact, the Apex Court in GE India Technology Centre (P.) Ltd. (supra) has rightly observed at para-16 as follows:- "16. The fact that the Revenue has not obtained any information per se cannot be a ground to construe section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all..." 35. Further, it must be noticed that the finding as regards deduction of tax at source under section 195 of the IT Act is tentative insofar as the Revenue is concerned Even if the Revenue o....
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....ed to TDS under section 192 of the Act. And therefore, at the time of making such reimbursement, to overseas entity, no taxes were deducted at source by the assessee in respect of reimbursements made as, according to the assessee, it was in the nature of cost-to-cost reimbursement, and, no element of income was involved. 26.10. The assessee in India does the TDS on 100% salaries u/s 192 and pay the same to the credit of the Central Government. Form 16 at page 228- 230 issued to Christopher Roberts of PB Vol I, by the assessee in Indian, Certificate under section 203 of TDS having deducted at source and further indicates the following - * Employee has a PAN number in India * Total taxable salary is Rs 9,761,581 (this corresponds to the US$ 130,000 as total compensation indicated in the local employment contract at para 4 * The Indian company does full TDS on 100% of the salaries, although 25% is paid in India and balance 75% outside India * TDS done is Rs 2,834,300/-, which translates to 30.8% of Rs 9,761,58 * Employee also contributes to Indian provident fund Rs.2,57,885/- 26.11. From conjoint reading of Article 15 of t....
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...."Salaries". 26.13. The definition of FTS under the Act excludes "consideration which would be income of the recipient chargeable under the head salaries." If the seconded employee is regarded as employee of the assessee in India, then the reimbursement to overseas entity, by the assessee in India would not be in the nature of FTS, but would be in the nature of 'salary', and therefore, the reimbursements cannot be chargeable to tax in the hands of overseas entity, and therefore there would be no obligation to deduct tax at source at the time of making payment u/s. 195 of the Act. 26.14. Article 12(4)-(5) of India USA, DTAA deals with "Fees for technical services', as under: "4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical know....
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....ng the economic employer. It is to be noted that the understanding as to who is the 'employee' in order to be excluded from, "fees for technical services", cannot be inconsistent with the 49/Bang/2022 understanding of employee for the purpose of Article 15 on income from employment, especially when Article 15 is an anti-abuse provision. 29. The Ld. DCIT placed reliance on the decision of the Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt. Ltd. reported (2014) 44 taxmann.com 300 concluded that the reimbursement was FTS and that services provided make available technical skill or knowledge for use by the assessee. 29.1. In case of the decision of Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt. Ltd vs. CIT(supra) dealt with identical case of reimbursement of salaries paid to expatriate employees. The Hon'ble Court held that, overseas entities had, through seconded employees, undoubtedly provided 'technical' services to Centrica India and that, the expression rendering technical services expressly includes provision of services of personnel. The Hon'ble Court held that the Seconded employees, were provided by overseas entities and work....
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.... the decision of Hon'ble Madras High Court in case of Verizon Data Services India (P) Ltd. v. AAR and Ors(supra), wherein it is held that, the reimbursement of salary of expatriates to foreign co by Indian company results in taxable income in the hands of the foreign company. Hon'ble High Court also upheld the observations of AAR, wherein it characterized the secondment of personnel as provision of managerial services. However, the Hon'ble Court set aside the ruling of Hon'ble AAR, wherein it held that, the reimbursement of salary of expatriates constitutes fees for included services in terms of Article 12(4) of India USA DTAA. Therefore, reliance placed on this decision is of no assistance to revenue. 29.4 There is another decision of Hon'ble Supreme Court in case of DIT v. Morgan Stanley reported in (2007) 162 Taxman 165, wherein, it is held that, in case of deputation, the entity to whom the employees have been deputed cannot be regarded as employer of such employees as the employees continue to have lien on his employment with the entity which deputes him. Entity seconding the employee is the employer as it retained the right over seconded employee is also held by Hon'....
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.... 29.7 As far as the decision of Hon'ble AAR in the case of AT & S (supra) is concerned, the facts of the said case were that AT&S, a company incorporated in Austria, offered services of technical experts to applicant, a resident company, pursuant to a foreign collaboration agreement on the terms and conditions contained in secondment agreement. Under the secondment agreement the applicant is required to compensate AT&S for all costs directly or indirectly arising from the secondment of the personnel, and the compensation is not limited to salary, bonus, benefits, personal travel, etc. but also includes other items. On the above facts, Hon'ble AAR ruled that the Contention that the payments are only in the nature of reimbursement of actual expenditure is not supported by any evidence and there is no material to show what actual expenditure was incurred by AT&S and what was claimed as reimbursement. A part of the salary of seconded personnel is paid by the applicant in Indian rupees and the remaining part is paid by the applicant to AT&S in Euro. While working with the applicant, the seconded personnel are required to comply with the regulations of the applicant, but they wo....
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....ceding terminology - "managerial, technical or consultancy services" or whether the bracketted words are to be regarded as integral part of managerial, technical or consultancy services undertaken by the payee of fee. In other words, is the bracketted clause a stand alone provision or is it inextricably connected with the said services? HMFICL itself does not render any service of the nature of managerial, technical or consultancy to the applicant and it has not deputed its employee to carry out such services on its behalf. There is no agreement for rendering such services. In this factual situation, it is possible to contend that merely providing the service of a technical person for a specified period in mutual business interest not as a part of technical or consultancy service package but independent of it, does not fall within the ambit of S.9(1)(vii)." 32. Hon'ble Bombay High Court in case of Marks & Spencer Reliance India Pvt. Ltd. VS. DIT reported in (2013) 38 taxmann.cm 190, upheld the view of Hon'ble Mumbai Tribunal which held that, payment towards reimbursement of salary expenditure without any element of profit, would not be taxable under the provisions of the A....
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....payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services a. .... b. make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design." Thus, even if, the rendering of service by the seconded personnel constitutes a contract for service, in the absence of making available any technical knowledge or skill to the Indian entity, the same shall not constitute fees for technical services. In support we refer to the decision of Hon'ble Karnataka High Court in the case of CIT vs. De Beers India Minerals Pvt. Ltd. reported in (2012) 21 taxmann.com 214, on the concept of 'make available', observed and held as under: "What is the meaning of 'make available'. The technical or consultancy service rendered should be of such a nature that it 'makes available' to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that th....
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.... Service", the learned counsel states that the employeremployee relationship exists between the Appellant and Seconded Personnel who have been sent on secondment to the Appellant; the Appellant has entered into separate employment contract with the Seconded Personnel. The seconded Personnel, during the period of secondment, work under the control and supervision of the Appellant; In terms of the employment contract, the appellant is under obligation to pay salary (including other entitlements) to the Seconded Personnel during the period of secondment in foreign exchange in his home country; for administrative convenience, the Appellant remits the salary payable to the Seconded Personnel in his home country in Foreign Exchange through the Seconder Company; the Seconded Personnel, as required under the Income Tax Act, 1961, files their respective returns under Section 139 of Income Tax Act, 1961 and shows the entire salary paid by the Appellant (including part of the salary paid in Foreign Exchange) as his/her income as salaries and pays the income tax thereon..... 14. Coming to the third issue of payment of salary, allowances and expenses of the personnel drawn from differe....
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....lly following the above views expressed by Hon'ble Karnataka High Court in DIT vs. Abbey Business Services India (P.)Ltd.(supra), Hon'ble AAR in Cholamandalam MS General Insurance Co. Ltd. (supra), Hon'ble Bombay High Court in case of Marks & Spencer Reliance India Pvt. Ltd. vs. DIT (supra), Hon'ble Delhi High Court in the case of DIT Vs. HCL Infosystems Ltd. (supra), Coordinate bench of this Tribunal in case of IDS Software Solutions vs. ITO (supra), Hon'ble Pune Tribunal in case of M/s. Faurecia Automative Holding(supra), Hon'ble Ahmedabad Tribunal in the case of Burt Hill Designs (P) Ltd. vs. DDIT(IT) (supra), we are of the view that the reimbursement made by the assessee in India to overseas entity, towards the seconded employees cannot be regarded as "Fee For technical Services" Once there is no violation of provision of section 195, assessee cannot be held to be an assessee in default under section 201(1) of the Act for all the years under consideration. We therefore direct the Ld.AO to delete the interest levied under section 201(1A) of the Act for all the years under consideration." 31. The ld AR submitted that the DRP has upheld the disallowance on the ground that....
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...., learned Deputy Commissioner of Income Tax (Transfer Pricing Officer)-2(2)(2), Bangalore (hereinafter referred as "TPO" for brevity) and the Honourable DRP-2, Bengaluru ("AO", "TPO" and DRP collectively referred as "lower authorities" for brevity) are bad in law and liable to be quashed. GROUNDS ON NATURAL JUSTICE The lower authorities have erred in passing the order based on conjecture and surmises, without considering all the submissions and/or without appreciating properly the facts and circumstances of the case and the law applicable. GROUNDS ON TAX EVASION AND CHARGE OF INCOME TAX The learned AO has erred in making a reference for the determination of the arms-length price of the international transactions to the learned TPO without demonstrating as to why it was necessary and expedient to do so. The lower authorities have erred in making adjustment under section 92CA without demonstrating that the Appellant had any motive of tax evasion. The lower authorities have erred in not appreciating that, the addition made to the income returned is bad in law as the charging or computation provision relating to income under the head "Pro....
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.... (b) the AO is not empowered to exclude companies on the basis of current year data not being available, as in such circumstances the data of the preceding year could be adopted. A comparable cannot be rejected because it is incurring losses or having negative networth if it is otherwise functionally comparable and not considering the various judicial precedents on this matter including the jurisdictional tribunal decision. On facts and in the circumstances of the case and law applicable, the lower authorities have erred in not making suitable adjustment to account for the differences in working capital position of the Appellant vis-a-vis the comparable. GROUNDS ON TRANSFER PRICING ADJUSTMENT IN TRADING SEGMENT The lower authorities have erred in making an addition of Rs. 3,19,38,000 on account of Gen. adjustment in the arm's length price for the international transactions related to trading segment. 12. The lower income tax authorities have erred in: (a) Rejecting the transfer pricing analysis undertaken by the Appellant on improper and unjustifiable grounds; (b) Conducting a fresh transfer pricing analysis despite absence of any ....
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....OBAL SALES AND MARKETING ACTIVITY FEES The lower authorities have erred in making an addition of Rs. 2,19,56,000 on account of adjustment in the arm's length price for the global sales and marketing activity fees ("GSMAF'). The lower authorities have erred in making the impugned addition and in not following the dictum of jurisdictional High Court, tribunal and DRP in Appellant's own case for earlier years. The order so passed is bad in law and in violation of law of precedents. The lower authorities have erred in: (a) Ignoring the business, commercial and industry realities and economic circumstances applicable to the Appellant; (b) Not appreciating that having adopted TNMM at the entity level (including the manufacturing and trading segment) while testing the arm's length price and considering it as integral in such working, it pre-supposes that the adjustments made therein subsumes GSMAF, thereby warranting no further or additional adjustment; (c) Concluding, without basis, that the payment towards GSMAF are in the nature of Advertisement, Marketing and Promotional ("AMP") enabling the AE(s) to build their brand: (d) Without prejud....
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....seas as being bereft of income or profit element is not chargeable to tax; The lower authorities have erred in placing reliance on the decisions of Northern Operating System Private Limited (civil appeal no. 2289-2293 of 2021), Centrica India Offshore (P.) Ltd. vs. CIT [2014] 44 taxmann.com 300 (Del), Food World Supermarkets Ltd. vs DDIT (International taxation) [2015] 63 taxmann.com 43 (Bangalore Trib.) and Verizon Data Services India (P.) Ltd. v AAR (2012) 346 ITR 489 (Mad) which are distinguishable and not applicable to the facts of the case. 25. The lower authorities have erred in not following jurisdictional High Court decision of DIT V Abbey Business Services (India) (P.) Ltd. [2020] 122 taxmann.com 174 (Karnataka), Flipkart Internet Pvt Ltd v DCIT [2022] 139 taxmann.com 595 (Karnataka) and Bangalore tribunal decision in Toyota Boshoku Automotive India Private Limited [2022] 138 taxmann.com 166 (Bangalore- Trib.). 26. The learned AO has erred in relying on DRP proceedings for AY 2015-16 wherein the directions were issued without considering the submissions made by the Appellant. The lower authorities have erred in not appreciating ....
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....ems related services 415.95 TNMM Payment of engineering support fees 477.93 TNMM Purchase of traded goods 15,275.05 TNMM Sale of traded goods 153.57 TNMM Commission received 272.30 TNMM Income from rendering of engineering services 13,206.73 TNMM Payment of CEC support fees 369.78 TNMM Management fees 87.75 TNMM Global sales and marketing activity fee 167.87 TNMM Reimbursement of expenses 494.23 Other Advance paid in relation to purchase of fixed assets 15.06 Other Trade Payables 4,926.36 Other Other Payables Trade receivables Total 1,725.31 Other 2,572.55 21,873.58 TNMM 32,808.54 Document 3 SI No. Comparable companies selected by the assessee Comparable companies 3 yr Weighted Adjusted Average (OP/OR) Manufacturing activity 1 Continental Controls Ltd 2 Supernova Engineers Ltd 3 Amtech Electronics (India) Ltd 4 Swati Switchgcars India Private Limited No of comparables Average SI No. Comparable companies Trading activity 1 Kusam Electrical Industries Ltd. 2 Remi Sales & Engg. Lid. No....