TaxTMI 
TaxTMI 
2025 (6) TMI 1934
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....officer /transfer pricing officer and the DRP have erred in law and in fact in computing the apart transfer pricing adjustment of Rs. 7,87,90,767 /-with regard to arm's-length price (ALP) of international transactions undertaken by appellant by disregarding the methodology adopted by the appellant in its transfer pricing (TP) documentation maintained in accordance with section 92D of the act read with Rule 10D of the Income tax Rules and the detailed arguments calibrate submission made by the appellant during the course of assessment proceeding before the learned TPO and honourable DRP. 3. Ground No.3: With respect to the international connection of payment of R & D fees to its AE, the AO and the learned TPO and honourable DRP have erred in law and facts by concluding the said international connection to be at non-arm's length and computing an upward transfer pricing adjustment of Rs. 3,27,07,848/- on the same. 4. Ground no. 4: with respect to the international connection of payment of management fees to its AEs the AO and the TPO and honourable DRP have erred in law and facts by concluding the said international transaction to be at non-arms length and computing ....
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...., TPO and honourable DRP have erred in law and facts by not appreciating that due taxes at source were paid on the international transaction of R &D fees and management fees in the form of withholding taxes that were withheld and charged to tax at gross on the said payments under section 195 of the Act. 12. Ground No 12:The honourable DRP has erred in law and facts in directing the TPO AO by ignoring the additional evidence brought on the record by the appellant and simply giving by the premises undertaken by the TPO and holding the transaction fails 'Failure of service rendition and receipt test'. 13. Ground No 13: The honourable DRP has erred in law and facts directing the TPO/ AO to use any other method without rejecting the appropriateness of the method used by the appellant. Further the honourable DRP has erred in law and facts that the use of any other method does the power the determination of arm's-length price to Nill. 14. Ground No 14, the honourable DRP has erred in law and facts in directing the TPO/ AO after restricting themselves that additional evidence filed in the nature of email, screenshots, invoices, tax invoices, policy document and c....
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....ning arm's-length price of payment of management fees and R&D expenses without applying one of the prescribed method as mandated by section 9 C of the Act., Accordingly, TPO order dated 25th October 2023, is bad in law and ought to be quashed. 22. Additional ground No. 22: On the facts and in the circumstances of the case and in law, the learned DRP have erred in mentioning 'other method' for determining arm's-length price of payment of management fees and R&D expenses without bringing on record any comparable uncontrolled transaction on record as mandated under section 92C of the Act. Accordingly, the DRP direction dated 30th August 2024, is bad in law and ought to be quashed. Consequently, the final assessment order dated September 18,2024, is bad in law and ought to be quashed. 2. Brief facts of the case as put before us, is that assessee is engaged in the providing of geo-intelligent and asset integrity solution of large construction, infrastructure and natural resources. The assessee filed its return of income for A.Y. 2021-22 on 14.03.3022 declaring total income of Rs. 2.97 Crore. Along with the return of income, the assessee furnished report in Form 3CEB reportin....
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....ustment on account of R & D expenses of Rs. 3,27,07,848/-which is challenged in the present appeals before this Tribunal. 4. We have heard the submissions of learned authorised representative (AR) of the assessee and the learned senior departmental representative (Sr DR) for the revenue. Though, the assessee has raised multiple grounds of appeal including additional ground of appeal, however, the substantial grounds of appeal relates to arm's length price (ALP) with regard to research and development fees (R&D Fees) and management services fees. The ld AR of the assessee has made any specific submissions on each and every ground of appeal. The ld. AR of the assessee submits that assessee is primarily involved in onshore and offshore surveys, navigation services, for oil and gas industry. The assessee's group i.e. its associated enterprises (AEs) owns a number of navigation and processing software which are used in accurate positioning of vessels, barges etc. and processing marine and land data mainly used in Oil and Gas Industries. Fugro N.V. (AE of assessee) has its own R&D facility for continuous improvement and to keep in place with industries demand in the above services. Th....
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....stems, processing and procedures to provide such services. They have charged such services based on management estimate prevalent during the time of provision of such services. Based on this, the international transactions of payment of management fees by assessee to its both the AEs are at ALP based on any other method (AOM). This transaction were also corroborated and tested under TNMM with entity level profit. Based on independent search, the OP/OI margin of independent comparable were between 9.52% and 15.80%, 9.52% being the 35th data point and 15.80% being the 65th data point with a maiden of 14.49%. The OP/OI margin of assessee is 12.27% which is within the arm's length range of independent comparable companies, the transaction between assessee and its AE is at ALP. All such details are available at page no. 47, 76 and 77 of paper book. The TPO while determining the ALP of both the payments of the transactions at Nil. The TPO determined such ALP without applying any method prescribed in section 92C. The bench marking analysis of comparable companies were not disputed by TPO. Before DRP, the assessee submitted additional evidence on 24.07.2024 which includes copy of agreement....
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....ous judicial precedents. To support such view, the ld AR of the assessee relied on the following case laws; * CIT Vs Lever India Export Limited in Tax Appeal No. 1306,1307 & 1308 of 2014 (Bombay High Court)/ (2017) 78 taxmann.com 88 (Bom), * Merek Limited in Tax Appeal No. 272 of 2014(Bombay High Court), * Kodak India Limited in Tax Appeal No.15 of 2014, * CIT Vs Johnson & Johson Limited in Tax Appeal No. 1292 of 2014 (Bombay High Court)/ (2017) 80 taxmann.com 269 (Bombay), * INEOS Styrolution India Limited Vs DCIT in ITA No. 330/Ahd/2022 dated 11.10.2022. 8. The assessee has also placed following documents on record, Particulars Page Nos. 1 Financial statements of assessee for FY 2020-21 1-40 2 Transfer pricing report (TPRS) for FY 2020-21 41-199 3 Form 3 CEB of assessee for FY 2020-21 200-211 4 Computation of income for FY 2020-21 212-214 5 Submissions before TPO dated 27.01.2023 215-217 6 Submissions before TPO dated 13.10.2023 218-221 7 Reply to SCN-1, filed on 13.10.2023 before TPO 222-356 8 Reply to SCN-2, filed on 23.10.2023 before TPO 357-4....
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.... expenditure was incurred for sales promotion of parent company was on higher side, and said TP adjustment was de hors provisions of Chapter -X of the Act and the appeal of revenue was dismissed. We find that Bangalore Tribunal in AXA Technologies Shared Services (P) Ltd. vs. DCIT (2016) 76 taxmann.com 102 (Bangalore -Tribunal) held that where the assessee paid certain management fee to its AE, it was paid under agreement and there was no finding by TPO that management services were availed by assessee separately by third party and book expenditure in Profit & Loss Account, then determination of ALP on payment in question at Nil was not acceptable. 12. We find that before DRP, the assessee filed adequate evidence in support of management fees as well as expenditure incurred on research and development. The additional evidence was accepted by DRP and matter was remanded back to the AO/TPO for remand report. However, despite repeated reminder, no remand report was furnished before DRP. Still, the DRP in taking adverse view and proceeded to examine such evidences as recorded on page no. 127 of its order. The DRP held that most of the evidences comprised of emails and invoices, agre....