TaxTMI 
TaxTMI 
2024 (2) TMI 1377
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....n Transfer Pricing adjustments (TP Adjustment) on following accounts: * Payment of fees for time and hilling software-Rs..2,64,23,881 * Provision of regional co-ordination services- Rs..3.11.195 * Information Technology Cost allocation (IT Cost allocation) - Rs..4,25,00,327 3. Aggrieved, Assessee filed objections before the Dispute Resolution Panel ("Ld.DRP") against the draft assessment order dated 26.02.2014 passed by the Assessing Officer incorporating the TP Adjustments proposed by the Ld. TPO. The Ld. DRP confirmed the additions proposed in the draft assessment order vide DRP Directions dated 28.11.2014. In pursuance to the Ld. DRP's directions, the Assessing Officer passed the final assessment order dated 22.11.2015 making total additions of Rs..6,92,35,403/-. 4. Aggrieved, the Assessee is in appeal before us raising following grounds in its appeal: - "1. On the facts and in the circumstances of the case and in law, the learned Deputy Commissioner of Income tax 3(3) (2) ('the learned AO')/ the learned Additional Commissioner of Income-tax Transfer Pricing II(5) ('the learned TPO"), under the directions of the Hon'b....
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.... initiation of the aforesaid penalty proceeding. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 5. Further, assessee has raised following additional grounds: - "8. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer erred in not granting deduction in respect of Education Cess and Secondary and Higher Education Cess payable on the income tax payable for AY 2010-11 while computing the Income from Business and Profession. 9. On the facts and in the circumstances of the case and in law, the final assessment order dated 22 January 2015 passed by the Learned Assessing Officer (Ld. AO) under section 143(3) read with section 144C(13) of the Act is barred by limitation and therefore, is void-ab-initio, bad in law and is liable to be quashed." 6. At the outset, Ld. Counsel for the assessee submitted that the above additional grounds of appeal are purely legal grounds, however, he submitted that the additional ground no.1 is not pressed at this stage du....
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.... (Refer Pg No. 224 to 227 of the PB). 10. Ld AR submitted before us that during the course of assessment and appellate proceedings before authorities, assessee has made following submissions: - "2.5. In the course of TP proceedings, the Assessee submitted all the relevant documents to demonstrate the rendition need and benefit of the time & billing software. Further, the Assessee also submitted the relevant reports of the independent expert in support of its benchmarking analysis. 2.6. The list of documents submitted by the Assessee in the course of TP proceedings is as under: * Form 3CEB- (Pg No. 142 of the PB) * TPSR containing functional and economic analysis of the transaction - (Pg No. 224 to 227 of the PB) * Technology Licensing and Assistance Agreement between BCG USA and BCG India dated 1 January 2005 Annexure C1 to submissions dated 11 October 2013- (Pg No. 409 to 415 of the PB) Apart from the above, it was submitted before us that further documents were filed with the Ld. TPO as Annexure C to its submissions dated 11 October 2013 (Pg No. 409-410 of the PB): * Screenshots of the system to demonstrate its fun....
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....d No. 3, which is in respect of TP adjustment with respect to IT Cost Allocation, Ld. Transfer Pricing Officer has made similar TP Adjustments which are similar to the facts in Ground No. 1, for the sake of clarity, the relevant facts submitted before us are reproduced below: - "3.1. During the year under consideration the Assessee paid an amount of Rs. 4,25,00,327 to BCG USA towards IT Cost allocation. BCG USA acts as a hub for providing centralized licensing network & project management and other aspects of Information Technology. 3.2. These costs were charged by BCG USA to all the beneficiary companies including the Assessee on cost-to-cost basis without any mark-up. 3.3. During the year under consideration BCG USA provided various services such as Information Technology Services, Information Technology Infrastructure, Information Technology Software, WAN Costs, Information Technology Projects, Factiva etc. to the Assessee (Refer Pg No. 115-116 of the PB). 3.4. The IT Support provided by BCG USA benefitted the Assessee in increasing its efficiency, expansion, accessibility, and service quality. 3.5. BCG USA has dedicated personnel for....
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....DRP upheld the adjustment proposed by the Ld.TΡΟ." 13. At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts relating to the Ground No. 1 and 3 which are of similar nature. Further, he brought to our notice the written submissions and vehemently contended to the adjustments sustained by the lower authorities. For the sake of clarity, the submissions of the Ld.AR are reproduced below: - "4. Assessee 's submissions with respect to Ground No. 1 and 3: 4.1. At the outset, the Assessee humbly submits that it has provided detailed documentation to demonstrate need-benefitrendition of the impugned services. However, the Ld. TPO and DRP having taken cognizance of the documents, erred in rejecting the benchmarking analysis conducted by the Assessee for both the services. 4.2 In the instant case, as mentioned above, the Ld. TPO has determined the ALP as NIL for the services received by the Assessee from its AE without following any of the prescribed methods u/s. 92C of the Act read with Rule 10B of the Income Tax Rules, 1962 (the Rules"). 4.3. With respect to time and billing software, the Assessee has obtain....
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....ra 10/ Page 6) The copies of these decisions were tendered in the course of hearing before Your Honours. 9. The Assessee reliance is placed on the compilation of judgements submitted in the course of hearing before the Hon'ble Bench such as: * CIT v. Johnson & Johnson Ltd [ITA No. 1030 of 2014 (Bom. HC)] * CIT v. Lever India Exports Ltd. (ITA No. 1306, 1307 & 1349 of 2014 (Bom. HC)] * Transporter Industry International Gmbh v. DCIT (ITA No. 1240/Mum/2021 (Mum. Trib)] * Rolls-Royce Marine India Pvt. Ltd v. DCIT [ITA No. 689/Mum/2017 (Mum. Trib)], etc. 4.10. Further reliance is placed on the following decisions separately submitted in the course of hearing: * ACIT vs. Caparo Engineering India (P.) Ltd (91 taxmann.com 330 (Delhi. Trib)] * CLSA India (P.) Ltd vs. DCIT [152 taxmann.com 255 (Mumbai. Trib)]" 14. On the other hand, Ld. DR objected to the submissions of the Ld.AR of the assessee and agreed that Ld TPO has not applied the CUP method properly and prayed that these issues under consideration may be remitted back to AO/TPO to redo the bench marking as per law. 15. In the rejoinder, Ld AR ....
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....xports Ltd. (supra), the Hon'ble Bombay High Court has held that the jurisdiction of the TPO is specific and limited i.e. to determine the ALP of an international transaction in terms of Chapter X of the Act r.w. Rule 10A to 10E of the Income Tax Rules. It further held that the ad-hoc determination of ALP by the TPO dehors section 92C of the Act cannot be sustained. In M/s Merck Ltd. (supra), the respondent-assessee had entered into an agreement with its AE to provide technical knowhow/consultancy in 12 fields as indicated therein for a consideration of Rs.1.57 crores. The respondentassessee availed services of its AE during the subject year (AY 2003-04) only in 3 out of 12 fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs.1.57 crore is attributable to the 3 technical services which the respondent- assessee availed of and held that no consideration was payable in respect of 9 services provided for in the agreement. Thus the entire payment of Rs.1.57 crore was attributable only to the 3 services availed out of the 12 listed out in the agreement. It further held that only Rs.40 lacs could be considered as ALP attributab....
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....200.82 lakhs incurred by the Respondent on account of publicity and sales management as being excessive and/or payable by its parent, M/s. Johnson & Johnson, USA. (iii) The impugned order holds that transfer pricing adjustment done by disallowing the payment, on the basis of an assumption that it is excessive, is an action completely dehors the provisions of transfer pricing adjustment found in chapter X of the Act. The determination of the ALP has to be done only by following one of the methods prescribed under the Act. (iv) In view of the above, as the Revenue has not acted in accordance with the clear mandate of law, the questions as proposed does not give rise to any substantial question of law. Thus, not entertained." In M/s Kodak India Pvt. Ltd. (supra), the above position of law is reiterated by the Hon'ble Bombay High Court. As mentioned earlier, we notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of inform....
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....usters Hospitality Services Pvt Ltd NA 9. Tata Services Ltd. 1.39% Mean 14.13% 21. After considering the same, Transfer Pricing Officer rejected the same and has retained following four (4) comparables to benchmark the transaction as under: - Sr.No Company Name PLI(OP/TC) FY 2009-10 1. Akruti Center Infotech Ltd. -2.43% 2. Greenacre Holdings Ltd. 41.57% 3. The Hindustan Housing Co. Ltd. 19.59% 4. Lancor Maintenance & Services Ltd. 22.76% Mean 20.37% Determined the ALP adjustments as under: Operating Income as submitted by the assessee 2599344 Cost as per the Assessee 2417994 Operating Profit 181349 OP/OC 7.499977 OP/OC of Comparables 20.37 Arms' Length Profit 492545.4 Arm's Length Value of transaction 2910539 5% of International transaction 129967.2 Difference in the Actual Value and Arm's length value 311195.4 22. Aggrieved, assessee preferred objection before Ld. DRP and before Ld. DRP assessee has submitted the annual reports of the various comparables selected by the assessee. However, it was submitted that Ld. DRP has not considered th....
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....ccordingly, the same is dismissed. 27. With regard to Ground No. 5 which is in respect of short granting interest under section 244A of the Act, Ld. AR of the assessee brought to our notice that identical issue in appeal has been considered by the Co-ordinate Bench of this tribunal in the case of M/s. Small Industries v. DCIT in ITA No. 3707/MUM/2012 dated 15.09.2017 and prayed that similar direction may be given. 28. On the other hand, Ld. DR relied on the order of the lower authorities. 29. Considered the submissions and material placed on record, we observe from the record that identical issue has been considered by the coordinate bench of this Tribunal in the case of M/s. Small Industries v. DCIT (supra) and decided the issue in favour of the assessee, observing as under: - "7. We have carefully considered the rival submissions. Notably, the only issue in dispute is the period for which assessee is entitled to interest u/s 244A of the Act. According to the assessee, the CIT(A) erred in granting interest upto the date of issuance of refund voucher, i.e. 29.3.2010 whereas as per the assessee, it is entitled to interest upto April, 2010 (i.e. upto the date of rec....