TaxTMI 
TaxTMI 
2025 (11) TMI 916
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.... 144C (5) of the act wherein the total income of the assessee as per return of income filed on 30 November 2019 of Rs. 7,901,553,920/- which was revised on 29/9/2020 at Rs. 7,804,453,360 is assessed at Rs. 8,423,688,054/-. 2. Assessee has raised several grounds of appeal however at the time of hearing itself ground No. 1 which is general in nature, ground No. 2 on the issue of limitation contesting that the order passed is barred by limitation, ground No. 3 absence of document identification No. in the direction issued by the learned dispute resolution panel, were not pressed and therefore same are dismissed. 3. The ground No. 9 regarding charging of interest under section 234D of the act and ground No. 10 on initiation of the penalty proceedings are consequential as well as premature respectively and therefore same are dismissed. 4. Thus, the assessee has contested ground No. 4 which is with respect to the consideration of the employee's stock compensation cost amounting to Rs. 55. 4 crores holding that same is capital in nature and not allowable under section 37 of the act. As per ground No. 5 the assessee is requesting that the dividend distribution tax paid to its ....
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....tion and after sale support for support product of SAP AE. The assessee performs the distribution function in terms of the distribution agreement wherein the assessee markets a range of its products and provides support services to independent customers in India. It has a non-exclusive license to use, market and sublicense SAP AG software products in India. It pays royalty to that company for the sublicensing of the software and maintenance service provided to the end-user to compensate it for the right to sublicense and use of the intellectual property in the software developed by the SAP AG. The functions performed by the assessee as a part of the distribution products are resale activity, marketing, and advertisement, rising, deduct customisation, replication of SAP software, quality control, sales and distribution, maintenance services, consultancy services, training services et cetera. It also renders a consultancy service for implementation of software systems, customisation of software products and business solutions. 7. It has entered an international transaction of royalty payment in respect of software licensing and maintenance revenue of Rs. 19,532,077,658/-, consulta....
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....n, granted 30 days credit period, applied SBI short-term deposit interest rates for the computation of interest and thereafter the interest adjustment was computed at Rs. 65,234,694/-. Accordingly, the order under section 92CA (3) of the act was passed on 28th of January 2022. 12. While computing the income of the assessee the learned assessing officer found that assessee has incurred expenses towards employee stock compensation cost of Rs. 554,000,000. The assessee was issued show cause notice asking for the breakup of the employee benefit expenses which is provided by the assessee based on this it was stated that it should be disallowed. The assessee submitted its reply on 23 September 2022 stating that the ultimate parent company of the assessee has established an incentive scheme as part of its stock options were issued to certain key employees of the assessee. The scheme was conceptualised with a view to encourage/ownership among employees and to motivate and encourage employees and to compensate them for their dedication, hard work, and commitment. It was further stated that during the year the parent company has cross charged to assessee ESOP cost pertaining to its India ....
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....g the decision of the honourable Karnataka High Court in assessee's own case, we also direct the learned assessing officer to delete the disallowance of Rs. 554,000,000 on account of the employee stock option expenditure being compensation cost paid to its parent company considering it allowable under section 37 of the act. Accordingly ground No. 4 of the appeal is allowed. 17. Ground No. 5 is with respect to the refund of excess dividend distribution tax. The claim of the assessee is that dividend distribution tax was calculated originally at the rate of 20.56% paid to its foreign shareholders wherein according to the double taxation avoidance agreement the impugned tax rate should have been 10%. Therefore, the assessee has computed tax under section 115O of the act at the rate of 20.56% amounting to Rs. 513,882,353/- which as per 10% rate should have been Rs. 25 lakhs and therefore the excess tax paid of Rs. 26,38,82,353 should be refunded to the assessee. 18. The arguments of the assessee are same as were raised before the special bench in case of Deputy Commissioner of income tax versus the Total Oil India private limited in ITA No. 6997/mum by/2019. As the issue is s....
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....ted the contention of the assessee to adopt a LIBOR rate and held that SBI short-term deposit interest rates is an index rate adopted under Indian conditions to charge interest which is neither an ad hoc nor inappropriate as contended by the assessee. In assessee's own case for assessment year 2017 - 18 and 2018 - 19 identical issues arose as per ground No. 2 in ITA No. 875/Bengaluru/2022 for assessment year 2018 - 19. This ground has been dealt with at paragraph No. nine of the order of the coordinate bench at page No. 11. In paragraph No. 13 the coordinate bench has held that "however, in the present case, while arriving at the quantum of the said receivables, we do accept the contention of the learned counsel of the assessee for netting of the outstanding payables by the assessee to the AE so that the interest is computed on the net outstanding receivable for the year under consideration." We do not find any logic, any reason, any judicial precedent, any provision of law, any commentary considered by the coordinate bench while holding so. Against this it is held by the bench in the same paragraph that in view of the retrospective amendment with effect from 1 April 2002 the d....
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.... carefully considered the rival contention and perused the orders of the learned lower authorities as well as the direction of the learned dispute resolution panel. We find that the TPO has already used segmental data to compute the margin. Therefore, this company is functionally comparable as the margins are used of the segment which is comparable with the assessee. Further as far as the issue of the RPT filter is concerned, the learned dispute resolution panel has categorically held that the taxpayer itself has shown that the RPT income/sales is at 1.71%. The ratio of RPT income/cost is inapplicable since PLIs OP/OR and not OP/OC, therefore RPT is to be checked for RPT/sales and not RPT/cost. Therefore, the objection of the taxpayer was not acceptable, but the learned dispute resolution panel directed the learned transfer pricing officer to verify the RPT calculations as per the filter applied by him and include this company if it passes the RPT filter. We find that the direction of the learned dispute resolution panel is half-hearted if PLI is operating profit/operating revenue, the operating profit will include the operating cost also. Therefore, if the cost segment of operatin....
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....e distribution activities. Therefore, we direct the learned transfer pricing officer to exclude the above comparable. 29. In case of Innovana think labs Ltd, we find that the learned dispute resolution panel has dealt with this comparable at paragraph No. 6.1.9 wherein it is stated that the revenue from sale of software is Rs. 40.80 crores against the total revenue of Rs. 42.28 crores which is more than 95% of the total revenue which consist of other income and finance income also. Since the revenue from the sale of products are more than 95% there is no need of segmental data. However, the objection of the assessee is that that company is engaged into the business of software development and not distribution. The learned dispute resolution panel has also recorded sales segment but has included this company. On reading the explanation of the assessee we find that this company is not comparable as it is engaged in software development. Hence the learned transfer pricing officer is directed to exclude the same. 30. The next comparable challenged is the quick Heal technologies Ltd, the learned transfer pricing officer has included this comparable but the learned dispute resoluti....