TaxTMI 
TaxTMI 
2024 (5) TMI 344
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....price of the Appellant's international transaction of provision of management consultancy services at Rs. 30,91,74,079 instead of Rs. 23,79,44,777 as determined by the Appellant and thereby making an adjustment of Rs. 7,12,29,302. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 2. On the facts and in the circumstances of the case and in law, the learned AO/TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of payment of license fees for time and billing software at Nil instead of Rs. 2,70,67,280 as determined by the Appellant and thereby making an adjustment of Rs. 2,70,67,280. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 3. On the facts and in the circumstances of the case and in law, the learned AO / TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of provision of regional co-ordination services at Rs. 6,08,28,453 instead of Rs. 5,78,31,951 as determined by the Appellant and thereby making an adj....
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....s that the learned AO be directed to drop the 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." 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidences brought on record in the form of Paper Books duly considered in the light of Rule 18(6) of ITAT Rules. Judicial decisions wherever relied upon duly considered. 4. Briefly stated the facts of the case are that the, assessee is a global management consulting firm and the world's leading advisor on business strategy. Assessee is a part of BCG group, which is an international strategy consulting firm with a strong global presence. It has a presence in major countries of the world. It provides insights to clients on the factors that drive value creation and add competitive advantage in their businesses and the economy as a whole and converts such insights into strategies, whose implementation would have a probable positive impact ....
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....e standard hourly rates charged by BCG India to unrelated parties are as under: - Designation Standard Hourly rates (In INR) Officer 17500 Manager 12000 Project leader 10000 Consultant 6500 Associates 6500 Knowledge Group 1601 7. During the transfer pricing assessment proceedings, the Transfer Pricing Officer observed that the assessee has not submitted copy of agreement entered with the AE for providing specific services and on analyzing copies of agreement related to non-AE in respect of Godrej & Boyce Mfg Co. Ltd., IndusInd Bank and Mphasis Corp, the Transfer Pricing Officer observed that the assessee has erased most of the part, to which the assessee explained that due to confidential reasons it is unable to provide the entire document. The Transfer Pricing Officer was of the opinion that the assessee has not submitted the kind of work mentioned in these documents. It is not clear that what kind of services the assessee is supposed to provide. Therefore, it is not possible to comment whether similar serves were provided for AE. On further analyses the Transfer Pricing Officer found that there is no mention of hourly charges. The amou....
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....he same category like project leader, or manager but due to their qualification and super specialty their hourly rates may be differ. Therefore, it would be incorrect to say that there is a discrimination in charging of hourly rates. Considering the facts of the case in totality, we are of the considered view that the action of the Transfer Pricing Officer is not only erroneous but also against the facts of the case in hand. 12. Assuming that the Transfer Pricing Officer application of TNMM is the most appropriate method, we find that while applying the TNMM, the Transfer Pricing Officer has computed the profitability of BCG India at a company level and subsequently computed a proportionate profitability to impute the adjustment with respect to the international transaction of provision of management consultancy services. If the assessee's segmental profit and loss account is considered wherein the revenue and expenses are allocated between AE and Non-AE on an appropriate basis. Then the profitability arising of the AE segment is 44.02% whereas in case of Non-AE it is 3.77%. On a perusal of the internal TNMM analysis, we find that the assessee has earned significantly higher mar....
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....s. 2,10,06,610/- (payment for information technology cost allocation), he has not adopted any of the prescribed method. In the case of M/s Lever India Exports 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 wa....
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.... on record to indicate that the TPO had applied any one of the prescribed methods in Section 92C(1) of the Act to determine the ALP before disallowing the payment of Rs. 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....
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....MS India Ltd Annual report not available 8. Horizone Environmental Services ltd Annual report not available Mean 1.89% 19. While considering the TPSR of the assessee, the Transfer Pricing Officer was of the opinion that Vatika Marketing Limited is not a good comparable for the reason that it is in the business of building maintenance which activity is not at all functionally comparable to the activity of the assessee. The Transfer Pricing Officer was of the firm belief that the FAR is not comparable. Transfer Pricing Officer further rejected TATA Services Limited who is providing Services to Group Companies on No Profit No Loss basis and further rejected SDB Cisco I Ltd., , EQMS India Ltd., Horizone Environmental Services Ltd., for want of annual report. The final set of comparables and the determination of Arm's Length Price was done as under: - Sr.No Company Name PLI(OP/TC) 1 Lancor Maintenance & Services Ltd. 19.89 2 Office Care Services Ltd 4.44 3 Geo Connect Ltd 14.89 Mean 13.07 9.2.5 since the PLI of the assessee is less than that of the Comparables the transaction is not at Arm's Length. Therefore, t....
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.... and perused the relevant materials on record. The reasons for our decisions are given below. An examination of the order of the TPO made u/s 92CA(3) dated 20.10.2011 clearly indicates that while making the adjustment of The Boston Consulting Group. 8 Rs. 1,62,74,359/- (payment for time and billing software license), Rs. 3,73,07,488/- (regional and worldwide training) and Rs. 2,10,06,610/- (payment for information technology cost allocation), he has not adopted any of the prescribed method. In the case of M/s Lever India Exports 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 respondent- assessee availed services of its AE during the s....
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....in higher royalty, has not determined the ALP by following any of the methods prescribed u/s 92C(1) of the Act r.w. Rule 10B. On appeal by the revenue, the Hon'ble Bombay High Court held that : (ii) The TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in Section 92C(1) of The Boston Consulting Group. 10 the Act. In this case, there is nothing on record to indicate that the TPO had applied any one of the prescribed methods in Section 92C(1) of the Act to determine the ALP before disallowing the payment of Rs. 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....
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....and, 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 receipt of refund voucher on 6.4.2010). In this context, we find that the Hon'ble Bombay High Court in the case of Pfizer Limited, 191 ITR 626 (Bom) has held that assessee is entitled to interest upto the date of receipt of the refund order. Similarly, our coordinate bench in the case of M/s. Novartis India Limited, ITA No. 1249/Mum/2010 dated 18.3.2011 has decided a similar issue in favour of the assessee by referring to an unrepo....