TaxTMI 
TaxTMI 
2024 (4) TMI 1137
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....t filed the captioned appeal (appeal no. 2413/Mum/2021) on 22nd December 2021 against the order of Commissioner of Income Tax (Appeals) -58 raising total 13 grounds inter alia including the below-mentioned grounds of appeal on issues related to transfer pricing. Transfer pricing adjustments/additions/variations. 8.1 The ld. CIT (A) erred in law, on facts and in circumstances of the case in not deleting the transfer pricing adjustments/additions/variations made by the ld. DCIT. as being bad in law, illegal and unsustainable on the basis of the following grounds, taken singly or cumulatively: 8.1.1 (a) The ld. DCIT has failed to comply with the mandatory conditions stipulated in section 92C(3) of the Act and has failed to record his satisfaction before making the reference to the Transfer Pricing Officer ('TΡΟ"). b) The ld. TPO failed to prove that any of the conditions laid down in section 92C(3) of the Act had been satisfied which made out a case for tax evasion. 8.1.2 The ld. DCIT/TPO failed to arrive at a finding that the intention of the Appellant was to evade tax and shift profits outside of India which is a condition precedent for making the Transfer....
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....at the loans given by the Appellant are in substance "quasiequity" in nature and are as a part of shareholder's activity on which returns are not expected in the form of interest. 10.2 The ld. CIT(A) erred in law and on facts in holding that the interest charged on loans outstanding/provided during the year by the Appellant to its AEs is not at arm's length. 11. Provision of guarantees to AEs 11.1 The ld. CIT(A) erred in law and on facts, in holding that the provision of various guarantees by the Appellant to third parties on behalf of its AEs were international transactions. 11.2 The ld. CIT(A) erred in law and on facts, in not appreciating the fact that provision of guarantee is a shareholder activity and no income is expected to be generated from the same. 11.3 Without prejudice to the above, the ld. CIT(A) has erred in law and on facts in disregarding the Appellant's contention that the guarantee fee should be charged based on the effective rate of insurance premium paid by the Appellant as a percentage of group revenue. 11.4 Without prejudice to the above, the ld. CIT(A) erred in law and on facts in not considering guarantee fees to be charged on actua....
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.... addition, and hence the net profit margin realised (PLI) by the tested party (AEs) has to be computed with the relevant base of VAE (Value Adding Expenses) only and not with the base of Sales by AEs to its customers, as AEs' cost for software and services has been billed by AEs to its customers back-to-back and passed onto the assessee and therefore such pass- through cost for the AEs cannot be taken in the base and only the VAE in the hands of the AEs can be taken as the base in view of the relevant base to be adopted as mandated under Rule 108(1)(e)(i)? 9.4 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is right in holding that GP/Sales is the appropriate PLI and not OP/VAE, ignoring the fact that the AEs did not perform any function or own any asset or bear any risk pertaining to the software development services received from the assessee, for which the subcontract payment has been made to the assessee by AEs by obtaining the same from their customers back to back and therefore, the same should be excluded as pass-through cost from the PLI computation and only VAE incurred by the AEs to be taken as the base? 9.5 Whether on the facts and ci....
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.... was adopted by the TPO for AEs, the same PLI of OP/VAE was not adopted for comparables and hence the comparability fails, is right in not setting aside the issue back to the TPO with a direction to adopt the same PLI of OP/VAE for comparables also? 10. On the issue of Financial Guarantee: 10.1 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in directing the AO/TPO to restrict the adjustment made on account of Financial Guarantee Commission to Rs. 2,23,39,3601- as against Rs. 4,39,05,509/- charged by TPO? 10.2 Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is right in reducing the rate of Financial guarantee fee from 1.50% to 0.77% ignoring the Appropriate CUP as applied by the TPO? 10.3 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is correct in holding that the fee for the financial guarantee issued by the assessee for the loans availed by the AE from banks should be charged at 0.77%, without appreciating the fact that the transfer pricing study differs from case to case and that all the factors in Rule 10B have to be considered for every case and every year independent....
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....n to charge lease/performance guarantee commission @ 0.88% on lease/performance guarantee in place of 1.5% charged by TPO? 11.3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in holding that the performance guarantee fee payable by the AEs to the assessee is to be computed by excluding approximately the 68.28% of the contract value attributing it as executed by assessee, ignoring the fact that the liability underlying the guarantee is for the contract as a whole? 11.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in holding that the fee for the lease / performance guarantee issued by the assessee for the lease facilities availed by the AE should be charged at 0.88%, without appreciating the fact that the transfer pricing study differs from case to case and that all the factors in Rule 10B have to be considered for every case and every year independently and that a rate decided for different set of facts and for different year cannot be adopted as such to the instant assessee, which would be violative of the specific provisions in Rule 10B? 11.5 Whether on the facts and circumstances of the case....
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....only be construed for "TATA" appearing in "TATA CONSULTANCY SERVICES(tm) and that has been duly remunerated by the assessee to Tata Sons Ltd. @ 0.25% of the Annual Net Income of each subsidiary. (iii) The BEPS Action Plan 8 to 10 emphasizes substance over form, economic reality over legal form and conduct of parties over contracts for evaluating a transaction from transfer pricing angle which has been ignored by CIT(A) which is more so when the Agreements and the Certificates issued relied on by the CIT(A) belong to the period much later to the Court Sanction Order. (iv) Even if it is assumed without admitting that there is some lack of clarity on the legal ownership of the trademarks, the CIT(A) completely ignored the economic ownership of the brand "TCS" and "TATA CONSULTANCY SERVICES" when the assessee itself claimed in its annual report of the very same FY 2013-14 that "TCS brand value up by US$ 3.04 billion in 2014; Overall brand value in 2014 US$ 8.2 billion; A 3X increase in the growth of our brand value; Consolidated our 'Big 4' position in the IT services category, 58% growth in brand value; "TCS' the Fastest Growing IT services brand in 2013 worldwide; Str....
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....their business revenues and for the brand "TATA" of which the Tata Sons Ltd is the legal owner for which it has been separately remunerated @ 0.25% by each of the AEs of the assessee (iv) Economic ownership and the value creation on brand as admitted by the assessee itself in its Annual Report has been completely ignored by the CIT(A). 12.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in completely ignoring and not adjudicating on the detailed analysis mentioned by the TPO in points 8.1 to 8.4 in page Nos. 33 to 56 of TPO's order, and instead tangentially relied on some Agreements entered into and Certificates issued that too after the legal transfer of all assets and liabilities as per Court Order dated 09.05.2003?" At para 12 of the Miscellaneous application the assessee submitted to recall the order of the ITAT to rectify the order to the extent it relates to assessee's ground no. 8 to 11.5 and Department's ground from 9 to 12.5. The relevant part of the Miscellaneous application is reproduced as under: "12. The Applicant therefore prays for the following: a) The Tribunal be pleased to kindly admit this Miscellaneous Appli....