TaxTMI 
TaxTMI 
2026 (3) TMI 731
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....ng the detailed analysis carried out by the Appellant in terms of determination of arm's length value in respect of provision of investment advisory services; 1:2 The AO/TPO/ DRP erred in disregarding the search process of the company without pointing out any deficiency in the search process and erred in rejecting valid comparable companies selected by the Appellant in order to benchmark its international transaction-the comparable companies rejected by the AO/ TPO/ DRP which ought to be included in the final list of comparables are mentioned hereinbelow: a. Everstone Capital Advisors Pvt Ltd .; b. ICRA Management Consulting Services Ltd .; c. Piramal Fund Management Pvt Ltd. d. CRISIL Risk & Infrastructure Solutions Ltd .; and e. SG Analytics Pvt Ltd 1:3 The AO/ TPO/ DRP erred in not appreciating that the fresh search is not conducted on the basis of contemporaneous data available in the public domain and thus is bad in law; 1:4 The AO/TPO/ DRP erred in selecting companies viz. India Life Capital Pvt. Ltd. and Ivycap Ventures Advisors Pvt. Ltd. which are functionally different from that of the assessee and....
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....me taxed in earlier year On the facts and the circumstances of the case and in law: 4:1 The AD erred in not allowing the consequential reduction of income taxed in AY 2017-18, in respect of Loan processing fee and income earned on Bank Guarantee and Letter of Credit (LC). 4:2 The AO erred in subjecting to tax twice a sum of Rs. 69,43,728 offered to tax in earlier year." 3. Brief facts of the case are that assessee is a banking company incorporated in South Africa with limited liability having a branch in India. Thus, the India branch, i.e., First Rand Bank Ltd. is a licenced service provider and a full-fledged branch of First Rand Bank-South Africa (FRB-SA) set up in Mumbai. India branch is a member of Indian banking fraternity offering corporate banking, investments banking, fixed deposits, currency and commodity and structured products with the objective of facilitating business in the Indo-Africa corridor, supporting South African clients in India and vice versa. Assessee filed its return of income on 30.11.2018, reporting total loss at Rs. 7,75,13,708/-. Assessee had entered into several international transactions with its Associated Enterprises (A....
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....gth basis without assuming any significant risk. In this regard, assessee assists FRB-SA in the collation of information, preparation of financial summary of potential opportunities and identifying key issues in relation to such opportunities. Ultimate responsibility lies with FRB-SA for recommending such potential opportunities to the clients by undertaking necessary checks and risk assessment, analysing the information so collated and research undertaken by the India branch. Assessee benchmarked this transaction by adopting Transactional Net Margin Method (TNMM) with profit level indicator (PLI) of operating profit/operating cost (OP/OC) and taking assessee as the tested party. By taking six comparables for the benchmarking of this transaction, assessee arrived at arm's length margin range of 3.34% to 4.39% with the median at 3.86%. For the year under consideration, return on total cost for the assessee is 20% and hence, was stated to be at arm's length. 5.1. In the course of transfer pricing assessment by the ld. TPO, he arrived at final set of comparables with three comparables which included one selected by the assessee. The same are tabulated below: Company Name....
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....omparables and exclusion of two comparables to arrive at the final list of comparables for the purpose of benchmarking of the impugned transaction. 6.2. In the course of hearing before us, ld. Counsel submitted that from the final list of three comparables taken by the ld. TPO, even if one, i.e., Ivycap is excluded, it will meet the benchmarking requirement, leading acceptance of margin reported by the assessee. 7. In view of the above, we first take up the comparable of Ivycap whereby assessee claims exclusion of it from the final list of comparables arrived at by the ld. TPO which will make it reach home. Assessee strongly submitted in this regard that while arriving at the final list of comparables, ld. TPO had issued a notice only on 28.07.2021 asking assessee to submit its response before 29.07.2021 giving less than 24 hours to meet the compliance which assessee could in fact submit on 30.07.2021. Because of this short notice, assessee could not make its effective representation to counter on various aspects for the exclusion of comparables finally considered by the ld. TPO. What assessee contended before the ld. TPO was that Ivycap is a high margin comparable and is oug....
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....rd are tabulated below: Calculation of outsourcing fees paid by Ivycap Ventures Advisors Private Limited Professional fees (overseas) 1,73,68,530 Professional fees (domestic) 10,65,611 Total Outsourcing Fees 1,84,34,141 Total expense 7,37,11,882 Outsourcing Fees/Total expense 25% Employee Cost (excluding director remuneration) 1,69,93,668 Outsourcing Fees/Employee Cost (excluding director remuneration) 108.48% 7.5. Thus, assessee strongly canvassed difference in the FAR of Ivycap with that of the assessee making it liable to be excluded from the final list of comparables. Ld. CIT DR on the above submissions strongly submitted that the stance taken by the assessee by resorting to RPT filter and high percentage of outsourcing expenses in respect of Ivycap comparable, these have been taken for the first time at the appellate stage which remained to be examined by the ld. TPO/AO and therefore ought to be rejected or be remanded back to the file of ld. TPO/AO for the purpose of verification and examination as to their correctness and appropriateness. 8. We have heard both the parties and p....
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....n the business of providing advisory and risk management services. It is recognised as a leading advisor to Governments, multilateral agencies and Public and Private sector enterprises. Its Annual Report states that it is engaged in a single segment of providing advisory services. Also, its website lists down services which are broadly similar to those rendered by the assessee. In respect of ICRA Management Consulting Services Ltd., it is engaged in the business of providing consultancy services in the areas of strategy, risk management, process consulting, transaction advisory, policy and regulation and development consulting. It also has single segment of providing consultancy services. Furthermore, this comparable has been accepted by ld. CIT(A) in first appellate proceeding for Assessment Year 2011-12 in assessee's own case. There is no change in the functional profile of the assessee or in the nature of services rendered and therefore, ICRA Management Consulting Services Ltd. ought to be accepted as a valid comparable in the year under consideration. For inclusion of these two comparables also, assessee submitted that TNMM having been adopted as most appropriate method, ex....
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....re in favour of Mumbai International Airport Limited ("MIAL"). The said guarantee to MIAL was further directed to the Airports Authority of India ("AAI") as proof of ACSA's capital commitment to MIAL. As a requirement of the beneficiary, the guarantee was supposed to be from a local commercial bank in India. FRB-SA reached out to its correspondent banks in India including FRB India and requested for feasibility of reissuance of the guarantee. The pricing quoted by FRB India was based on the rating and risk associated with FRB-SA and was at par with the market pricing for a similarly rated and similar value transaction. Basis the response time, ease of doing business and pricing provided, FRB-SA awarded the reissuance to FRB India. 11.1. In this regard, assessee received a counter-guarantee from FRB-SA and reissued the guarantee locally in favour of MIAL. The fee arrangement was structured in line with market practice, as per which assessee raised quarterly fee claims on FRB-SA, which in turn recovered the same from ACSA and remitted the amount to the assessee. In this regard, assessee received 0.40% p.a. of the guarantee as commission, over and above the mark-up charged for ....
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.... by documentary evidence, as well as agreement placed on record, we hold that the allocation of guarantee commission which constitutes about 57% in the hands of assessee, finds favour for the assessee by taking into account its FAR. Accordingly, the guarantee commission rate arrived at by ld. TPO/DRP at 1.55% and upward adjustment made based thereon, is deleted. Ground no. 2 is thus, allowed. 13. Ground no.3 relates to disallowance made u/s. 40(a)(i) on account of payments made to MasterCard and VISA, whereon TDS was not done u/s. 195. According to ld. Assessing Officer, these payments constituted royalty/fees for technical services (FTS) on which TDS was required to be done u/s. 195. Ld. Assessing Officer placed reliance on the decision of Authority for Advance Rulings (AAR) in the case of MasterCard Asia Pacific Pte. Ltd. (AAR No. 1573 of 2014, dated 06.06.2018) where in it was held that MasterCard had a permanent establishment (PE) in India and that payments received were taxable as business income in India. According to the ld. Assessing Officer, VISA and MasterCard function as payment network processors between issuing and acquiring banks and card holders. Payments made by ....
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....x at source from payments to non-residents and assessee fails to comply with such an obligation. 13.3. In view of the above, as well as decision of binding nature by the Hon'ble Jurisdictional High Court of Bombay in the case of Citibank N.A. (supra), assessee did not have any tax withholding liability on payments made to VISA and MasterCard in the relevant point of time. Assessee cannot be held to be liable to deduct tax at source by placing reliance on the subsequent development of jurisprudence. Reliance placed by ld. Assessing Officer on the AAR Ruling (supra) leads to impossibility of performance at the end of the assessee, since AAR Ruling was delivered on 06.06.2018, whereas the previous year wherein the TDS ought to have been done as warranted by ld. Assessing Officer was on or before 31.03.2018. It was impossible for the assessee to deduct tax in the financial year 2017-18, relevant to Assessment Year 2018-19 when the Ruling by the Hon'ble Jurisdictional High Court of Bombay in the case of Citibank N.A.(supra) was holding the fort, carrying the binding force in nature, in favour of the assessee. The legal maxim lex non cogit ad impossibilia comes into play to su....
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....income of Rs. 1,41,01,753/- recognised in the books, income amounting to Rs. 79,14,358/- was apportioned and offered to tax in AY 2018-19. b. During AY 2018-19, out of the total income of Rs. 2,47,76,206/- recognised in the books, income amounting to Rs. 9,70,630/- was apportioned and offered to tax in AY 2019-20. 16.2. However, ld. Assessing Officer, while passing the assessment order for Assessment Year 2017-18, taxed the entire income of Rs. 79,14,358/- in the year of receipt itself (AY 2017-18) instead of apportioning it over subsequent years. While assessee had filed its objections before ld. DRP, they were later settled under Vivad Se Vishwas Scheme since the issue represented only a timing difference. Consequently, to prevent double taxation of the same income, assessee claimed a corresponding reduction in Assessment Year 2018-19. Ld. Assessing Officer, however, disallowed the reduction in Assessment Year 2018-19 on the ground that there was no provision in the Act permitting such adjustment otherwise than by filing a revised return of income. Ld. Assessing Officer relied upon the Supreme Court's decision in Goetze (India) Ltd. v. CIT 284 ITR 323 (SC) to hold....