TaxTMI 
TaxTMI 
2024 (7) TMI 128
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....ibunal in its order. 3. The first ground which remained unadjudicated in Revenue's appeal relates to the issue of provision of software technical and consultancy services. 4. The brief facts of the case are that the assessee is a leading global information technology consulting services and outsourcing company having worldwide presence of more than 20 years. TCS provides consultancy services, develops and implements products for customers covering on all matters pertaining to implementation of computer software and hardware systems, management of data processing and information systems and data communication systems. It carries out its overseas operations through a web of foreign subsidiaries which act as marketing and sales support companies of TCS. 5. During the year under consideration, the assessee has reported among others the following international transactions with its AEs:- Sr. No. Nature of transaction Transaction amount (Rs.) Method 1. Provision of software and consultancy services 45359,63,87,176 TNMM 2. Availing of services 1390,75,49,727 TNMM 3. Interest received on amount of loan outstanding 11,199,637 Other me....
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....is of the above comparison carried out, the assessee has considered its transactions to be at ALP. 7. During the course of transfer pricing assessment proceedings, the Transfer Pricing Officer was of the firm belief that the facts of the present assessment year are almost identical with those of A.Y. 2014-2015. The TPO observed that the TPO in the earlier years has analyzed the transactions in detail and had concluded that the value addition that was done by the AEs was not significant and hence, the complexity of function performed by the assessee was more than that of the AEs. So the AEs could well be considered as the tested party and appropriate bench marking could be done considering the value addition as the benchmark for profit comparison in the AE case. 8. Taking note of the earlier years proceedings, a show cause notice was issued to the assessee asking it to explain as to why TAIC and other AEs should not be considered as the tested parties for bench marking of ALP of the transactions. The assessee was also asked as to why the operating margins of foreign comparables as selected by the TPO for benchmarking in the order for last assessment year shall not be applied w....
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.... only by learned Commissioner (Appeals) but they were also produced before us. Thus, from the aforesaid facts, it becomes clear that significant marketing functions are being performed and distribution and marketing risk are being taken by the AEs. On examination of the financials of the subsidiaries it is revealed that some subsidiaries are still making loss at net level which signifies that some risk is being borne by the AEs. It has further been brought on record that the manpower base of AEs performed various functions relating to marketing as well as client co- ordination. The AEs have developed sufficient competency to handle the marketing work independently. The entire contract related work is performed by the AEs, though, in cooperation with the assessee. Thus, it is quite natural that for being a sufficiently motivated work force, the AEs are compensated at return on sales and not merely on value added costs. Therefore, learned Commissioner (Appeals) was justified in directing the Transfer Pricing Officer to adopt the PLI of gross margin on sales. As regards consideration by the Transfer Pricing Officer, the outsourcing / sub-Tata Consultancy Services Ltd. contracting cost....
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....smissed. 21. In view of our decision on the grounds raised by the Revenue, grounds no.7 and 8, in assessee's appeal have become academic, hence, do not require adjudication. 22. At this juncture, we must make it clear that our decision here in above on the aforesaid grounds would not apply to transfer pricing adjustment made in respect of AEs situated in USA and Tata Consultancy Services Ltd. Netherland, as such issues are covered under the MAP resolution, as discussed earlier. 23. In view of our decision in ground no.10 in assessee's appeal, no separate adjudication of grounds no.11, 12 and 13, in Revenue's appeal is required. Hence, they are dismissed." 10. On finding parity of facts and the facts that the TPO and the A.O. have passed the decision on the findings given by them in earlier assessment years, respectfully following the decision of the co-ordinate Bench (supra), we hold accordingly. This ground in Revenue's appeal is dismissed and the ground raised in assessee's appeal becomes infructuous. 11. The second issue which remained unadjudicated in Revenue's appeal relates to provision of guarantee. The underlying facts in this issue are that....
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.... in A.Y.2007-2008 in ITA No.3262/Mum/2017 and 3389/Mum/ 2017, following the order of the co-ordinate Bench (supra) for A.Y. 2009-2010 has decided similar quarrel as under:- "35. We have heard the rival submissions and perused the relevant materials available on record. Similar issue arose before the Tribunal in assessee's own case for AY 2009-10, wherein it is held:- "43. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Insofar as the contention of learned Sr. Counsel for the assessee that provision of guarantee is not an international transaction as per section 92B of the Act, we are unable to accept such contention. In our considered opinion, after introduction of Tata Consultancy Services Ltd. Explanation-(i)(c) to section 92B of the Act, with retrospective effect from 1st April 2002, provision of guarantee to AEs has to be considered as an international transaction. Different Benches of the Tribunal have also expressed similar view on the issue. Therefore, we hold that the provision of guarantee to the AEs is an international transaction. In fact, the aforesaid view has been ex....
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...., the same was advanced so that it could meet its working capital requirement and could carry out expansion. The main contention of the assessee is that there are business and commercial rationale for providing these loans and were provided for the purpose of acquisition, which would benefit in terms of increased business and revenue and are quasi-equity in nature. 18. The TPO rejected the contention of the assessee. The TPO was of the opinion that since the assessee has advanced loan to its AEs and it is recorded so in the books of both the assessee and the AEs, therefore, in form and substance, the nature of the transaction is loan only. Dismissing the contention of commercial expediency, the TPO observed that the facts remains that the assessee and the AEs are two different corporate entities functioning in two geographical boundaries as separate business entities. The TPO also rejected the contention that the loans are quasi-equity as the assessee had option of investing in equity and there was no regulatory bar on the same. Yet, the assessee preferred the debt route. Therefore, the same is a commercial transaction in the form of a loan advanced. The TPO accordingly proceede....
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....apital requirement and other business uses, however, he has not elaborated as to for what other purpose loans were advanced. Without properly dealing with the factual aspect of the issue, learned Commissioner (Appeals) has jumped to the legal aspect and has held that the amount advanced by the assessee is in the nature of loan and has to be benchmarked as such. After considering the submissions of the parties and examining the material on record, we are convinced that various submissions made by the assessee before learned Commissioner (Appeals) have not at all been dealt with. The primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder's activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid down in the relevant case laws. It also requires deliberation whether it can be considered as an international transaction under section 92B r/w Explanation-1(c). Since, the aforesaid legal and factual aspects have not been considered properly, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of be....
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.... the information technology for A.Y. 2013-14 and is a very powerful brand and the value of brand has been quantified at 8.2 billion USD as per the annual report. The assessee submitted before the TPO that the brand legally owned by the Tata Sons Limited and so the assessee has no right to charge for fees for the brand. 85. The assessee also submitted that the revenue sharing model it follows with the AE also includes the brand royalty remuneration and no additional fees or royalty is needed. The TPO did not accept the submissions of the assessee. The TPO held that the assessee is the actual value contributor and maintains, practices and evidences the value of the brand through its service delivery credentials. Accordingly, the TPO was of the view that it is the assessee, who is entitled for appropriate return for the brand value. The TPO applied 2.9% royalty on the revenue earned by AEs using TCS services to arrive at an adjustment of Rs. 1187.06 crores. On further appeal, the CIT(A) deleted the TP adjustments made towards the provision for software an consultancy and adjustment made towards brand royalty fees. 86. The ld AR submitted that the coordinate bench in ....
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....essed very same issue. The decision rendered thereon shall apply mutatis mutandis to this appeal except with variance in figures. The relevant operative portion of the Tribunal order dated 12/06/2013 referred to supra is reproduced hereunder:- 2. The issue raised in ground No. 1 relates to the disallowance of Rs. 32,42,666/- made by the A.O. on account of payment made by the assessee to M/s Tata Sons Ltd. on account of subscription towards "TATA" brand equity and business promotion scheme. 3. The assessee in the present case is a company which is engaged in the business of providing services to the global automotive industries. The return of income for the year under consideration was filed by it on 30-9-2008 declaring total income of Rs. 51,05,63,935/- which was subsequently revised to Rs. 52,34,36,910/-. In the profit and loss filed along with the said return, an amount of Rs. 32,42,666/- was debited by the assessee on account of subscription paid to Tata Sons Ltd. towards TATA brand equity and promotion scheme. While justifying its claim for the said payment, the following submissions were mainly made on behalf of the assessee before the A.O:- "By ente....
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....er been examined in past and had been allowed without any verification, with due respect to the ratio of the decision in the case of Radhasoami Satsang Vs. CIT (1992) 193 ITR 321 (SC), it is submitted that the same is not applicable to the present case. The similar issue is involved in the case of Tata Chemical Ltd. a group company of the Tata Group wherein, DRP have confirmed the proposed addition on the ground of disallowance of brand equity subscription. For the reasons given above, the A.O. proposed disallowance of Rs. 32,42,666/- on account of subscription paid by the assessee to Tata Sons Ltd. in the draft assessment order against which objection was filed by the assessee before the DRP. The DRP found the objection of the assessee to be unsustainable keeping in view that a similar issue was being agitated by the Department at various appellate forums. Consequently, final disallowance of Rs. 32,42,666/- was made by the A.O. on this issue. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee, at the outset, has invited our attention to the copy of relevant....
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....facilities to perform their functions. g) To take steps to make available a pool of sharable resources of the TATA Group including managerial talent trained in TATA values to the Subscriber. h) To provide necessary guidance to the Subscriber in order to ensure appraise the performance of the Subscriber in various areas of its activity and to guide and assist the Subscriber in the attainment of higher standards of quality of its products, services and management. i) To adopt the JRD Quality Value and/or other such process as a means of appraise the performance of the Subscriber in various areas of its activity and to guide and assist the Subscriber in the attainment of higher standards of quality of its products. Services and management. j) To provide such support and assistance to the Subscriber as the Board of Directors of the Proprietor Company may consider necessary in certain circumstances including securing the support of Group companies to the extent and in a manner permissible under the prevalent laws. k) to encourage support to the Subscriber's business from Group companies subject to the availability of products and services of ....
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.... this issue. The copy of the said order is placed on record at page 1 to 21 of the compilation of the judgments filed by the ld. counsel for the assessee and a perusal of the same shows that a similar issue was decided by the Tribunal in favour of the assessee by agreeing with the view of the ld. CIT(A) that the payment in question not only permitted the use of TATA name but also gave an opportunity to the assessee to inform the business world that it was having the back up of excellence, with a code of conduct and a promise of quality. It was held that the fact that the TATA group was already having an infrastructure and brand equity was well established and by making such a contribution, the assessee company was benefited in its day-to-day business. The Tribunal also found that a similar issue was decided in favour of the assessee in case of Harrisons Malayalam reported in 19 SOT 363 wherein the payment made for acquiring non-exclusive licence to use the logo for the purpose of business was held to be allowable u/s 37(1) of the Act being the expenditure wholly and exclusively incurred for the purpose of business. It is pertinent to note that in the case of Tata Steel, another com....