TaxTMI 
TaxTMI 
2024 (12) TMI 974
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.... for specified period. The issues contended by the assessee for both the AYs are tabulated as under: Issue AY 2017-18 AY 2018-19 The draft assessment order passed is barred by limitation Ground No.1 (1.1 and 1.2) - Disallowance of export commission for non-deduction of tax at source u/s. 40(a)(i) Ground No.2 (2.1 & 2.2) - T.P. Adjustment towards provision of product development and other IT Services Ground No. 3 ( 3.1 & 3.2) Ground No.1 T.P. Adjustment towards provision of sales and marketing supporting services. Ground No.4 (4.1 & 4.2) Ground No.2 & 3 Non-grant of credit for foreign tax credit Ground No.4 Levy of interest under section 234A, 234B & 234C Ground No.5 Initiating penalty proceedings under section 270A of the Act. Ground No.5 Ground No.6 Non scrutinizing the revised return of income Ground No. 6 (6.1 & 6.2) Non granting credit for advance tax and TDS Ground No. 7 & 8 Not granting interest under section 244A on refund due Ground No.9 ITA.No. 2461/Mum/2022 -AY 2017-18 3. The assessee filed the return of ....
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....ssee with the foreign agent in Korea and Indonesia, the agents are providing consultancy services which as per Article-12 of the DTAA is to be treated as FTS. The AO accordingly held that the export commission is taxable in India on which the assessee ought to have deducted tax at source and since the assessee has not deducted the tax the AO made a disallowance under section 40(a)(i) on the export commission paid to the foreign agents in Korea and Indonesia. The DRP confirmed the disallowance made by the AO. 6. The ld. AR submitted that the foreign agents of the assessee do not render any consultancy services to the assessee and are rendering sales, marketing and customer support services only. The ld. AR in this regard drew our attention to the recitals in the agreement entered into with the foreign agents as extracted in AO's order. The ld. AR further submitted that the income earned by the foreign agents by way of export commission are Business Income in the hands of the foreign agents and since these agents do not have any Permanent Establishment (PE) in India they are not taxable in India warranting any tax deduction at source. The ld. AR also submitted that the AO has ....
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....ssion paid to the foreign agents and held that "6. We have heard the parties and perused the material placed before us. We find that both the issues have been considered by the the ITAT, Mumbai Bench "G" for AYs 2011-12 and 2012-13 in ITA Nos.247 & 248/Mum/2016 in order dated 26-02-2018 and decided in favour of the assessee and against the revenue with the following observations:- "6. It is clear from the order of the CIT(A) that after applying various judicial pronouncements, he reached to the conclusion that payment to M/s. Columbus Travel Media Ltd., and Zagat Survey LLC cannot be treated as royalty u/s. 9(1)(vi) of the Act. Hence, assesses was not required to deduct tax u/s. 94 of the Act, accordingly, no disallowance can be made u/s. 40(a)(i)of the Act. 7. With regard to export commission paid to the foreign agents, the CIT(A) recorded a clear finding that commission has been paid for procuring export order and payment was made outside India. After relying on the CBDT Circular No.23 of 1969, 786 of 2000 and 7 of 2009, the CIT(A) held that no tax is deductible in respect of such export commission. The CIT(A) also relied on the decisions of ITAT Delhi ....
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....operating profit / operating cost as the PLI and Transaction Net Margin Method (TNMM) as the most appreciate method for completing the ALP. In the T.P. Study report (TPSR) the assessee has chosen 14 comparables the average margin of each is in the range of 4.08% to 19%. Since the margin of the assessee is at 15% the assessee treated the price charge to be at Arm's Length. The TPO rejected 7 comparables chosen by the assessee for the reason that the comparables are functionally not comparable to that of the assessee. Accordingly the AO recomputed the average margin of the balance 7 comparables to arrive at a median of 17.34% and made a T.P. Adjustments of Rs. 24,14,138/-. Though the assessee raised grounds pertaining to the exclusion of the 6 comparables of those excluded by TPO, during the course of hearing the ld AR presented arguments only with respect to inclusion of the following 3 comparables and submitted that if these comparables are included, the inclusion of the rest of the comparables will not be pressed. (i) Isummation Technologies Pvt. Ltd. (ii) Sagar Soft (India) Ltd. (iii) Yudiz Solution Pvt. Ltd. 11. The ld. AR submitted that the above t....
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.... * It is submitted that the comparable company is engaged in the business of software development (Page 639-640 of PB). * Further, as per the Revenue from operations also, it is submitted that the Appellant has derived the same from IT services only. (Page 649 and 659 of PB) * Based on the above it is submitted that the company is functionally comparable to the Appellant and therefore be included in the list of comparables. 12. The ld. DR relied on the order of the TPO. 13. We have heard the parties and perused the material on record. We notice that Isummation Technologies Pvt. Ltd. is engaged in the business of software development and from the perusal of the financial statement it is clear that there is only one business segment from which the company is deriving income i.e. software development. Therefore, we do not see any merit in the findings given by the TPO that the said company is not functionally comparable to the assessee. We also notice that the TPO while rejecting the comparable has relied on the data from website of the company and has not given any other material finding as to why the comparables is excluded. Therefore, we are not incline....
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....rgin of the balance to comparables at 25.18%. Accordingly, the TPO arrived at an adjustment of Rs. 6,62,392/-. 19. Out of the 2 comparables retained by the TPO, the ld. AR presented arguments with regard to exclusion of Majestic Research Services and Solutions Ltd. from the final list of comparable chosen by the TPO. The ld. AR argued that - "Functionally different * The Company is engaged in market research, advertising research, brand research and consumer research and other research services etc. (Page 2310 of PB) * The Company provides a host of services like Eye tracking, Mobile Analytics, Facial Recognition, Digital-Tracking Automated Audience measurement, Online Communities, Virtual Reality etc. The company offers a wide spectrum of innovative research tools and end-to-end research service offerings. (Page 2311, 2312, 2355 and 2314 of PB) * These services are in the nature of research services and therefore considered as High-end services and functionally different from the marketing support services provided by the Appellant Diversified Business operations and no segmental data available: * Further, the comparable ope....
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....has correctly not considered the revised return. The ld. DR further submitted that until the delay is condoned by CBDT the revised return is not effective and therefore there is no infirmity in the order of the AO. 26. We have heard the parties and perused the material on record. From the report of the AO, we notice that the assessee has made an application for condonation of delay before CBDT for filing the revised return belatedly and that the assessee is yet to receive order from the CBDT condoning the delay. Therefore we see merit in the contention of the Ld DR that the revised return cannot be considered until the delay is condoned. Accordingly we remit the issue back to the AO with a direction to consider the income declared in revised return of income once the order condoning the delay received from CBDT while re-computing the income as per the directions in this order. 27. Ground No. 7 & 8 pertain to non-granting of credit for advance tax and TDS. We notice that the AO has not given the credit for the reason that the advance tax and the TDS are paid in the name of merged entity. Since the belated return filed by the assessee including the income and taxes of the merge....