TaxTMI 
TaxTMI 
2023 (5) TMI 1475
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....facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order. 2. The assessee has, more or less, raised common grounds of appeal in all four assessment years. Therefore, for the sake of brevity, grounds of appeal filed in IT (TP) A No.48/Chny/2019 for the AY 2009-10, are reproduced as under: The grounds of appeal listed below are without prejudice to each other. 1. The order passed by the Joint Commissioner of Income tax (OSD), Corporate Circle - 2, Chennai (Assessing Officer or the AO) pursuant to the order of the Deputy Commissioner of Income-tax, TPO-2(2) (Transfer pricing officer or TPO) and the directions issued by the Dispute Resolution Panel - 2, Bangalore ('DRP'), is erroneous and bad in law, to the extent the same is prejudicial to the Appellant. 2. The TPO/AO/DRP erred in law and in facts, in not identifying any uncontrolled comparable transaction while considering Comparable Uncontrolled Price ('CUP') method as the most appropriate method to benchmark the impugned international transactions pertaining to payment of sales commis....
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....tion entered into, 6. The TPO/AO/DRP erred in law and in facts, by violating the principles of consistency and judicial discipline by not following the binding judicial precedents in Appellant's own case as well as other decisions of higher appellate forums, thereby leading to undue harassment to the appellant and chaos in administration of tax laws. The TPO/AO/DRP ought to have appreciated that the agency commission payment made by the Appellant has been accepted in the past (by the TPO up to AY 2007-08 and during AY 2010-11; by the AO in his order post Hon'ble Tribunal's direction in AY 2001-02, 2002-03 and 2003-04 and post CIT(A) order in AY 2004-05), to be allowable as arm's length and there is no change in facts and circumstances of the impugned international transaction visa-vis such years. 7. The TPO/AO/DRP erred in holding that the complete JV agreement was not made available to the tax authorities in the earlier assessment years despite sharing evidences to the contrary. 8. The TPO/AO/DRP have failed to appreciate that the Appellant is a three party Joint Venture ('JV') where in the JV partners act as independent ....
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....inst which, the assessee is in appeal before the Tribunal: Issues Assessment Year 2009-10 (Remand) 2011-12 2014-15 2015-16 IT (TP) A No.48/Chny/ 2019 ITA No.802/ Chny/ 2016 IT (TP) A No.54/Chny/ 2018 ITA No.2725/ Chny/ 2019 Transfer Pricing Adjustment towards payment of agency commission √ √ √ - Disallowance under Section 36(i)(v)(a) of the Income Tax Act, 1961 ('the Act') - Grounds withdrawn - - Disallowance of additional depreciation claimed under Section 32(i)(iia) of the Act on Air Circuit Breakers on the basis that they are not a part of plant and machinery - Grounds withdrawn - - Disallowance of additional depreciation claimed under Section 32(i)(iia) of the Act @ 10% claimed in Year 2 - - Grounds withdrawn - Disallowance under Section 80JJAA of the Act - √ √ √ 4. The first issue that came up for our consideration from assessee's appeal for AYs 2009-10, 2011-12 & 2014-15, TP is adjustment towards payment of agency commission. The facts with regard to impugned dispute are that the assessee had entered into an agency agreement d....
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....he issue related to payment of agency commission was under dispute from AY 2001-02, where the Tribunal for the AY 2001-02, has set aside the issue to the file of the TPO/AO to re-examine the ALP of international transactions with respect to agency commission paid to AEs in light of various evidences filed by the assessee including scope of work specified in agreement between the parties, relevant evidences filed in support of rendering of services, etc. He, further submitted that the Ld.CIT(A) for the AY 2004-05 had relied upon the order of the Tribunal for AYs 2001-02 to 2003-04, and deleted the disallowance of agency commission and Revenue not challenged the said order of the Ld.CIT(A) and the issue had reached finality. He further submitted that once the matter has reached finality, for subsequent years without there being any change in the facts, different view cannot be taken. In this regard, he relied upon the decision of the Hon'ble Madras High Court in the case of M/s. Sutherland Global Services Pvt. Ltd., Chennai, in TCA No.32 of 2019 dated 23.09.2020. 6. The Ld.Counsel for the assessee further submitted that the TPO has placed reliance on the Article-5 of the Joint Ven....
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....cessity of such services and payment made thereon. 7. The ld.CIT-DR, on the other hand, supporting the order of the DRP/Ld.CIT(A) submitted that for AYs 2001-02 to 2004-05, agency commission has been disallowed u/s.37(1) of the Act, and hence, those years cannot be considered. For AYs 2005-06 to 2007-08, no adjustment has been made by the TPO/AO. For AY 2008-09, the issue is pending for adjudication. For AY 2009-10, the issue has been set aside to the file of the AO/Ld.CIT(A) to examine the claim of the assessee. The TPO/AO brought out clear facts that except email correspondence, no evidence has been filed to justify, and rendering of services by AEs. Further, as per JV agreement between the assessee and its partners, there is an obligation on M/s. Mast, USA, to buy 50% of goods manufactured by the assessee. The assessee has sold 100% to JV partner as per agreement. Under these facts, the assessee could not explain why it has paid agency commission to an entity in Hong Kong when entire services have been rendered in connection with sales made in USA. Therefore, the AO/TPO has made adjustments towards agency commission and their orders should be upheld. 8. We have heard both ....
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....ka, two AEs which are situated in different countries. The assessee claimed that AEs have provided services in connection with marketing, production of garments manufactured by the assessee and in this regard, the Ld.Counsel for the assessee took us to various clauses of agency agreement and scope of services specified in said agreement. The Ld.Counsel for the assessee had also took us to few email correspondence between the assessee and its AEs in connection with manufacturing and selling of goods. We have gone through JV agreement between assessee and its JV partners and as per said agreement, M/s. Mast, USA, must buy at least 50% of goods and merchandise manufactured by the assessee and in fact, the assessee has sold 100% sales to M/s. Mast, USA alone, and there is no dispute in this regard. We have also gone through agency agreement between M/s. Triumph & assessee, and M/s. MAS, Sri Lanka & assessee, and we find that although, various scope of work has been specified in the agreement, but fact remains that the assessee could not file any credible evidence to prove that what services these two AEs are provided to the assessee in connection with sales made to M/s. Mast, USA. We f....
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....t to see is whether the assessee has filed evidences to prove rendering of services to justify payment of commission. In this case, the assessee could not even file any evidences except few email correspondence and thus, we are of the considered view that there is no error in the reasons given by the TPO/DRP/Ld.CIT(A) to reject the arguments of the assessee. 11. Coming back to the arguments of the assessee in light of principle of res judicata and rule of consistency in light of certain judicial precedents. The Ld.Counsel for the assessee, in light of decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in [1991] 100 CTR 267 (SC) submitted that even though, res judicata is not applicable to income tax proceedings, but the rule of consistency needs to be followed, unless there is a change in facts when compared to earlier Financial Years. We find that the Hon'ble Supreme Court held that res judicata is not applicable to the income tax proceedings. However, rule of consistency needs to be followed. There is no dispute on this legal aspect, because, when there is no change in the facts and circumstances of the case, the AO needs to take a consiste....
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.... regard to aggregation approach and bench marking method adopted by the TPO, is incorrect. In so far as various case laws relied upon by the assessee those case laws are not applicable to this case, because, the TPO has made 100% adjustment on the ground that said expenditure is paid without any services from its AEs. 12. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that there is no error in the reasons given by the DPR/Ld.CIT(A) to sustain additions made by the AO/TPO towards TP adjustment on payment of agency commission and thus, we are inclined to uphold the findings of the DRP/Ld.CIT(A) and reject the ground taken by the assessee for AYs 2009-10, 2011-12 & 2014-15. 13. The next issue that came up for our consideration from assessee's appeal is for AYs 2011-12, 2014-15 & 2015-16 is disallowance u/s.80JJAA of the Act. During the AYs 2011-12, 2014-15 & 2015-16, the assessee claimed deduction u/s.80JJAA of the Act, in respect of additional wages paid to newly appointed employees and claim made by the assessee, has been allowed in the year in which assessee has made its claim. However, the AO restricted the deduc....