TaxTMI 
TaxTMI 
2018 (7) TMI 2348
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....that the appellant was not required to pay royalty in respect of services provided to the associated enterprise. 2.1 That the assessing officer/DRP erred on facts and in law in holding that in terms of 'Intangible and Proprietary Property and Licensing agreement' ("the Agreement") dated 02-01-2002, royalty was required to be paid only on the proportionate sales made to unrelated third parties. 2.2 That the assessing officer/DRP erred on facts and in law in not appreciating that the entire revenues of the appellant are from sale of services to third parties - whether such third parties are direct customers of the assessee or customers of the associated enterprise, and accordingly royalty was payable on the total revenue. 2.3 That the assessing officer/DRP erred on facts and in law in making a transfer pricing adjustment of Rs. 1,05,26,525 undertaking cost benefit analysis to determine the arms length price of payment of royalty without appreciating that cost-benefit analysis is not a prescribed method under Rule 10B of Income Tax Rules, 1963. 2.3 That the assessing officer/TPO erred on facts and in law in applying CUP method for benchmarking the transaction of payment of....
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....bunal) Rules, 1963 ('the Rules') are briefly stated hereunder: In terms of the foreign collaboration agreement dated 02-01-2002 entered into with TP USA, the applicant provides services to customers of TP USA in different parts of the world through its facility situated in India. In terms of the foreign collaboration agreement, the applicant provide voice based call centre services to third parties, which are customers of TP USA, viz., Washington Mutual, Telus, San-disc, etc. It would be appreciated that the associated enterprise of the applicant, TP USA solicits business from various customers ('third parties'), which business is then performed by the applicant in India. For the services rendered to such clients of TP USA, the applicant receives payment from TP USA. In terms of the collaboration agreement, TP USA, in addition to providing marketing, information technology and systems support to the applicant company and training to the employees, would provide management support and on-site technical assistance and training to ensure international standard of service. Further, in terms of paragraph 5 of the foreign collaboration agreement dated 02- 01-2002, TPUSA pays ....
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.... shall be paid to TP USA within ten (10) days following the end of each month, based upon the aggregate Accumulated Gross Revenues of TP India from the immediately preceding month and any of the aggregate Accumulated Gross Revenues of TP India from any other prior months with respect to which the Royalty has not been paid. At the time the Royalty is paid, TP India shall also provide such documentation of the aggregate Accumulated Gross Revenues of TP India in the form of the Royalty Notice. Any unpaid Royalties shall accrue and be payable by TP India as soon as cash is available. The parties hereby agree that no dividends shall be declared or paid by TP India if any Royalties remain unpaid and outstanding. " The term "accumulated gross revenues" in clause 3.1 is defined in clause 1.1 of the Agreement as under: "1.1 Accumulated Gross Revenues "Accumulated Gross Revenues" shall mean the gross receipts from sales of services in the Territory by TP India to Third Parties less customary deductions, including: (a) transportation charges, including insurance: (b) sales or excise taxes, customs, duties, tariffs, and any other governmental charges imposed on the production, importatio....
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....angible property, knowhow, customer relationship management (CRM) services, etc. with respect to entire sale revenues of the applicant, including sales to third party customers of TP USA for which revenue is received from TP USA. It is accordingly not open to the Revenue to sit in judgment and interpret the Agreement in a manner different from what was intended and agreed between the parties. Therefore, the parties in order to set out in unequivocal and unambiguous terms, the understanding and the real intention of the parties to the agreement, have post facto entered into the addendum to the Intangible and Proprietary Property and Licensing agreement dated 02-01-2002 with TPUSA, which is effective retrospectively, i.e. from 02-01-2002, providing as under: "1.15 Third Party or Third Parties "Third Party" or "Third Parties" shall mean any entity or entities to which TP India has rendered services either directly or indirectly through and Affiliate but shall exclude direct services to and for the individual benefit of a party to this Agreement or and Affiliate." In the aforesaid circumstances, by way of the present petition, the Addendum to the Intangible and Proprietary ....
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....by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect." (emphasis supplied). Reliance is also placed in that regard on the following decisions: CIT v. Hewlett Packard India: 314 ITR 55 (Del HC) CIT v. Chandra Kant Sahu Bhai: 202 Taxman 262 (Del HC) CIT v. Betterways Finance: ITA 995 of 2009 (Del HC) Jatia Investment Co v. CIT: 206 ITR 718 (Cal HC) Electra (Jaipur) Ltd v. IAC: 26 ITD 236 (Del ITAT) Y. W. C. A. of India vs IAC: 29 ITD 620 (Del ITAT) The applicant, it is respectfully submitted, in the course of the proceedings before the TPO and DRP filed several documents and made elaborate submissions in support of arm's length price of international transaction of payment of royalty to the associated enterprise. It is respectfully submitted that it was only on the receipt of the direction of DRP that the applicant came to know about the adverse inferences sought to be drawn by the DRP. The applicant thereafter, in order to rebut the inference drawn by the lower authorities, has entered in the addendum to the Intangible and Proprietary Property and Licensing agreement which set out in unequi....
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....nal evidence which has been filed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and looking to the facts and circumstances, it is our considered opinion that this Addendum to the agreement goes to the very root of the matter and it will suitably assist the lower authorities did not have the benefit of examining this document, the matter has to be necessarily restored to the file of the Assessing Officer / TPO for deciding the issue of royalty afresh after duly considering this agreement and after giving due opportunity to the assessee to present its case. Accordingly, ground no. 17 in assessee's appeal for assessment year 2008-09 also stands allowed for statistical purposes. 7.2 Since the Ld. AR has stated that if ground nos. 3 and 17 are decided in favour of the assessee, the other grounds will become academic in nature, we are not proceeding to hear the arguments of either of the parties on the remaining grounds at the present moment. We, however, note that the assessee will be at liberty to raise these grounds again before the Tribunal at a future date, if it is so required. 8. In the result, the assessee's appeal ITA No. 5930/Del/2013 stands partly allo....