TaxTMI 
TaxTMI 
2026 (2) TMI 1406
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd No. 2 - Disallowance under section 14A of the Act 2.1 On the facts and circumstances of the case and in law, the CIT(A) erred in upholding disallowance of Rs. 165,615 under section 14A of the Act read with Rule 8D of the Income Tax Rules ("the Rules") by treating the said amount as attributable to earning of exempt interest income without appreciating the fact that no expenditure was actually incurred to earn interest income claimed exempt while computing total income. Ground No. 3 - Retention of revenues by overseas subsidiaries in Singapore and Netherlands 3.1 The learned CIT(A) erred in rejecting the value of international transaction as recorded in the books of accounts and determining a new arm's length price in substitution of the arm's length price determined by the Appellant. 3.2 On facts of the case and in law, the CIT(A) erred and violated the principle of natural justice by not giving due cognizance to the detailed analysis of comparable companies submitted by the Appellant in its TP Study report. 3.3 The learned CIT(A) erred in considering Net Profit Margin (NPM) of 23.40% as against NPM of 22.31% earned by the Appellant a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appellant. The said 9 comparables are as listed below: 1. B2B Software Technologies Ltd 2. Birla Technologies Ltd 3. Compulink Systems Ltd 4. Exensys Software Solutions Limited 5. Kale Consultants Ltd 6. Maars Software International Ltd 7. PS I Data Systems Ltd 8. Sasken Communication Technologies Ltd 9. Tata Elxsi Ltd 3.10 The CIT(A) erred in cherry picking comparables to reach pre-conceived conclusions, with the sole object of rejecting comparables selected by the Appellant and arriving at skewed results. 3.11 The CIT(A) erred in arbitrarily selecting certain companies which are earning super normal profits and not functionally comparable to the appellant and adding those in the final set of comparables on an ad hoc basis. Ground No. 4 - The benefit of +/- 5% variation computed on Arm's length Price 4.1 Without prejudice to the above, the learned CIT(A) failed to provide the benefit of variation / reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act while determining Arm's Length Price for the adjustment made to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provider of comprehensive information technology solutions to the global financial services industry through a comprehensive range of products and customized service offerings, whereas the AEs perform very simple function of marketing support services abroad for the products and services of the assessee and that comparability, if assessee performing complex functions is taken as tested party, would lead to skewed and suboptimal results compared to that for AEs performing simple functions and hence, in such circumstances, it is always advisable to choose the AEs as tested party which would lead to easier and near-optimal comparability results? 3.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the facts that the Assessee is transacting with its AEs who are merely marketing entities and all the complex functions are being carried out by the Assessee? 3.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the facts that the assessee incurs substantial expenditure for the purpose of recruitment of employees and such recruited employees have been dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw, the Ld. CIT(A) is correct in holding that 'there are several challenges in accessing reliable and readily available data in case of the AEs despite they being lesser complex entities', though the assessee is duty-bound to produce the financials of the AEs under Rule 10D(3)(d) which the assessee has duly produced and that there is no difficulty in accessing the reliable data pertaining to AEs? 3.12 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not upholding the adoption of AEs as tested party in view of the facts and circumstances in the above grounds and as the AEs have simply performed marketing agent function for the assessee and it is ideal to remunerate them on simple cost plus method being the most appropriate method under the facts and circumstances, instead of taking assessee performing complex functions as tested party and using the least appropriate method of TNMM under the given facts and circumstances? 3.13 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in holding that the 'TPO imposed secret comparables without confronting them to the assessee and without provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of such receivables relating to non-AEs and on what similar grounds they could be taken as internal CUP? 4.2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest on receivables without appreciating the facts that the AE had already collected the receivables from the end customers and have huge cash balances at bank, earning huge amount of interest on such balances from their bank accounts at the cost of assessee, without paying the amounts due to the assessee in time and without compensating the assessee? 4.3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest on receivables without appreciating the facts that two of the AEs were remitting the proceeds within normal credit period of 60 days, whereas the third one was causing inordinate delay in making payments without any cogent reason, on which interest has been charged? 4.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest on receivables without appreciating the facts that the AE has earned interest on the bank balance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal contribution ($119,99,901) to AE which cannot be towards equity has to be necessarily considered as loan and interest to be charged, otherwise it leads to base erosion to India? 5.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on RBI permission to make capital contribution, as it cannot be stamp on ALP determination and erred in not adhering to the decision of Hon'ble Punjab & Haryana High Court in Coca Cola India Inc. v. ACIT (309 ITR 194) wherein it has been held that the Income tax Authorities are not bound by the RBI for determining ALP? 5.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on the decisions in the cases of S.A. Builders Ltd. CIT (2007) 158 Taxman 82 (SC) and Sony India (P) Ltd. vs DCIT (2008-TIOL- 439-ITAT-DEL) which are distinguishable on facts? 6.1 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition made of Rs. 3,17,08,761/- u/s. 92CA(4) of the I.T. Act, 1961 on account of fees paid to AEs for marketing of customization work of the assessee company without apprecia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3(1) on 03/06/2009. 3.1. Subsequently, the case was selected for scrutiny and notice u/s. 143(2) was issued on 04/08/2009. Thereafter, notice u/s. 142(1) dated 04/07/2011 was issued. In response, the assessee's authorised representatives, attended the proceedings from time to time and furnished the details called for. The case was discussed during the course of assessment proceedings. 3.2. The Ld. AO noted that the assessee had entered into international transactions with its Associate Enterprise [AE] exceeding the threshold limit. Reference was, therefore, made to the Transfer Pricing Officer [TPO] to determine the Arm's Length price [ALP] of the transactions. The Ld. TPO, upon receipt of the reference, called upon the assessee to furnish economic details of the international transactions in Form 3CEB. From the details furnished, the Ld. TPO noted that the assessee had entered into the following international transactions:- Sr. No. Nature of international transactions Amount (Rs. in '000s) 1 Sale / purchase of banking software product licenses 6,061,927 2 IT solutions and consulting services rendered / availed 6,167,807 3 Interest on loan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd reproduced as under:- Accordingly, Ground No. 1 and Additional Ground No. 5 raised by the assessee stand dismissed. 7. Ground No. 2 raised by the assessee relates to disallowance u/s. 14A in respect of interest expenditure. The Ld. AR submitted that considering the smallness of the amount involved, the assessee does not wish to press this ground for the year under consideration. However, liberty was sought to contest the issue in appropriate circumstances in any other assessment year. In view of the submission of the Ld. AR, Ground No. 2 is dismissed as not pressed, with liberty as aforesaid. 8. Ground Nos. 3 & 4 relates to the issue of retention of revenue by overseas subsidiaries located in Singapore and Netherlands. The Ld. AR submitted that this issue also arises in Ground Nos. 3.1. to 3.17, raised by the Revenue. Brief facts leading to the issue are as under: 8.1. It is submitted that, the assessee is engaged in providing information technology solutions to the global financial services industry through a comprehensive range of proprietary software products and customized services. The assessee designs, develops and markets software products and also provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly a 10% margin on marketing costs. 8.5. Accordingly, the Ld. TPO concluded that the AEs in the Netherlands and Singapore were earning profit margins of 73.27% and 35.82%, respectively, on apportioned marketing costs. At this juncture, the Ld. TPO ignored the AE based in the USA on the ground that it had incurred losses during the year. 8.6. The Ld. AR submitted that the assessee granted its AEs the right to distribute its products to end customers in their respective jurisdictions under license agreements. It is submitted that, the AEs enter into contracts with end customers and sold the assessee's products. He submitted that the AEs, being marketing and distribution entities, performed value-added functions and were incentivized to generate business and expansion and ensured significant market presence. It was further submitted that since the contracts were entered into by the AEs with end customers in their jurisdictions, the entire contract value was received and recorded as revenue in the books of the AEs, thereafter as per the Master Service Agreement, the AEs retained an agreed percentage of revenue towards the functions performed by them and remitted the balance to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). The arithmetic mean margin of these 11 comparables was computed at 23.40% as against the assessee's margin of 22.31%. The Ld.CIT(A) accordingly restricted the adjustment to Rs. 25,54,28,000/-. 9.2. Under the transfer pricing provisions, the "tested party" is the entity to which the transfer pricing method is applied for the purpose of benchmarking an international transaction or a specified domestic transaction. Although the term "tested party" is not expressly defined in the Act, the concept is recognized in Rule 10B and the OECD Transfer Pricing Guidelines and has been consistently followed in Indian jurisprudence. The tested party is ordinarily the entity which is the least complex of the associated enterprises involved in the transaction and for which reliable and comparable uncontrolled data is available. In selecting the tested party, regard must be had to the nature of functions performed, assets employed, and risks assumed (FAR analysis). Generally, the entity with a simpler functional profile, limited risks, and no ownership of unique intangibles is chosen as the tested party, since its margins can be more reliably benchmarked using external comparables. While in mos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isfy the requirement of arriving at the most reliable arm's length result. Accordingly, we hold that the Ld. TPO erred in selecting the foreign Aes as the tested party in the facts of the present case. 9.5. We find that the Ld. CIT(A), while granting partial relief to the assessee, restricted the transfer pricing adjustment only to the extent of the difference between the margin of the assessee and that of the comparables. However, the Ld. CIT(A) failed to extend the benefit of the tolerance band of +/-5% as provided under the proviso to section 92C(2) of the Act. The statutory proviso clearly mandates that where the variation between the arm's length price determined and the price at which the international transaction has actually been undertaken does not exceed the prescribed tolerance range, the transaction price shall be deemed to be at arm's length. 9.6. We note that the margin of the assessee has been computed at 22.31%, whereas the margin of the comparables has been determined at 23.40%. The difference between the two margins thus works out to 1.09%. In terms of the proviso to section 92C(2) of the Act, where the variation between the arm's length margin and the ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....computing deduction under section 10A of the Act. The assessee contended that the training income was intrinsically linked to the business of the undertaking and was earned in the course of its eligible business operations. It was explained that training forms an integral part of the software products sold to customers, as effective use of the software requires proper training; without such training, the usability and commercial viability of the products would be adversely affected. It was further submitted before the Ld. AO that there exists a direct nexus between the software products, the profits and gains of the undertaking, and the income derived from training activities. The assessee thus submitted that the training income is eligible for deduction u/s. 10A of the Act. 11.2. The submissions of the assessee were not accepted by the Ld. AO, and disallowed the claim in respect of training income while computing the deduction u/s. 10A of the Act by excluding the same from the export turnover. The assessee submitted that although such expenses were incurred, they were not recovered separately from customers. It was contended that no adjustment on this account was warranted eith....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oan to AE. Notional interest receivable on delayed receivables Brief facts leading to the issue are as under: 12.1. The Ld.TPO noted that in respect of recivables from Netherland and Singapore AE's, the Ld.TPO noted that most of the outstanding amounts were received by the assessee within the credit period of 60 days. However there was delay in remitting the recivables by the US AE. It was submitted that the amounts remained outstanding from the US subsidiary because the subsidiaries had not collected the dues from the end customers and, therefore, the same did not represent any advantage conferred upon the overseas subsidiaries. 12.2. It is submitted that the Ld.TPO considered the time lag between the payment received by the AE's from the end customers and the remittance made by the AE's to the assessee. The Ld.TPO rejected internal CUP, since the assessee charged NIL interest to third parties in case of delay in payment by them beyond the payment terms. The adjustment was proposed by the Ld.TPO on the premise that subsidiaries have delayed in remitting the dues after having collected the same from the end customers. 12.3. It is submitted that the adjustment was com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stment on account of notional interest. The Ld. DR further emphasized that the Ld.CIT(A) did not examine these aspects in detail and, therefore, the view adopted by the Ld.CIT(A) was not based on proper appreciation of the factual matrix. 14.1. Ld.AR submitted that the assessee operates in the software development industry, where emphasis is placed on building long- term relationships with customers and payment terms are not accorded the same level of strategic importance as in certain other businesses. The Ld.AR emphasized that no interest was charged by the assessee to third-party customers for any delay in payments and, therefore, the Ld.TPO was not justified in attributing notional interest on outstanding receivables from the subsidiaries. He submitted that the longer outstanding period was, inter alia, the result of the US-AE not having collected amounts from the end customers and did not represent any advantage conferred on the US-AE. 14.2. He further submitted that an identical issue arose in the assessee's own case for A.Y. 2006-07 in ITA No. 1473/Mum/2018 and ITA No. 1579/Mum/2018, wherein the Tribunal, vide order dated 23/06/2023, decided the issue by observing as u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermining ALP for the said transactions the Ld.TPO has not even examined the applicability of any other method prescribed under Section 92C(1) of the Act. Based on a controlled transaction, the Ld.TPO proceeded to adopt arbitrary 5.18% plus adhoc 200 basis points as the arm's length compensation for interest on delayed receipts from AEs. 14.6. The Ld.AR submitted that the use of controlled transactions for the application of the CUP method by the Ld.TPO is flawed that disregards the provisions of the law. We have perused the submissions advanced by both sides in light of the records placed before us. 15. Considering the rival submissions and the material on record, we note that this issue was examined by the Tribunal in the assessee's own case for A.Y. 2006-07 (supra), wherein the observations made in A.Ys. 2003-04 to 2005-06 were also taken into consideration. This Tribunal has remitted the issue back to the Ld.AO/TPO by observing as under: 9.3. We heard the rival submissions on this issue and perused the record. In A.Y. 2003-04 the Tribunal has accepted the contention of the assessee that the delay in realization from AEs has occurred for the reason that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Oracle Financial Services Software America Inc.(hereinafter referred to as OFSS), (formerly known as i-flex America Inc.) and ISP Internet Mauritius Company( hereinafter referred to as ISP Mauritius) at different period of time under different terms and condition. The details of the loan advanced by the assessee are as under: Name of the AEs Date of disbursement of loan Quantum of loan Rate of interest Date of determination of LIBOR Nature of rate of interest Amount (in Rs. ) OFSS America 1 January 2004 USD 10,000,00 0 6 month LIBOR plus 50 basis points As adjusted from time to time** Fluctuating rate 20,855,27 4 ISP Mauritius 22 December 2004 USD 950,000 12 month LIBOR plus 50 basis points LIBOR prevalent as of two days prior to the date of disbursement of the loan Fixed rate 1,338,099 Based on the above terms and conditions, the rate of interest earned during the year under the consideration on the loan provided to OFSS America was 5.18 percent and ISP Mauritius was 3.54 percent. 16.1. In the transfer pricing documentation the assessee, stated that the above loans were duly approved by Reserve Ban....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng legislation as it distorts the very principle of transfer pricing. Transfer pricing legislation in India is based on sound economic logic. In arriving at such arm's length outcomes, transfer pricing legislation seeks to disregard "Controlled" situations by a process of benchmarking these transactions with "Uncontrolled Transactions" between "Unrelated Parties". The arm's length price has to be established by comparing controlled transactions with uncontrolled transactions and not comparison of controlled transactions with other controlled transactions. The Learned TPO/ Additional CIT have not given due weightage to this fundamental principle which goes at the root of the transfer pricing legislation. Even on merits, parameters such as geographical region amount of loan, currency of loan, underlying security and creditworthiness of the borrower are relevant factors in determining interest rate. Even a quotation given by a third party i.e. a banker has only persuasive value, however it does not constitute a CUP since it is a quotation and not an actual uncontrolled "transaction". In the present case, the geography is very wide as one AE is in Mauritius while anoth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....credit under comparable circumstances. The rate adopted by the assessee is also in conformity with the internationally accepted benchmark for foreign currency denominated inter-company loans. 19.2. It is a settled principle that where a reliable internal CUP is available, the same deserves to be given precedence over external comparables, as it provides a more direct and accurate measure of the arm's length price, provided the transactions are comparable in terms of currency, tenure, and risk profile. In the present case, no material has been brought on record by the Ld. TPO to demonstrate any material differences between the bank loan and the loans advanced to the AEs which would have a bearing on the pricing. Nor has the Revenue brought on record any better external comparable. 19.3. The Ld. CIT(A), while adjudicating the issue, has followed the orders of the Tribunal in the assessee's own case for the preceding assessment years wherein, on identical facts, the benchmarking of interest by adopting LIBOR plus an appropriate basis point spread and applying the internal CUP method was accepted. No distinguishing feature in facts or in law has been brought to our notice for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that details regarding utilization of the funds infused as capital contribution into OFSS America Inc. fort the year under consideration is placed at pages 395 to 396 of the paper book and also formed part of the submissions made before the Ld. CIT(A) on this issue. 20.3. It is submitted that the Ld. TPO treated the capital contribution made during the financial year relevant to A.Y. 2008-09 amounting to USD 12.16 million as an interest-free loan to OFSS America Inc. The Ld. TPO was of the opinion that, since the funds were infused in the form of capital, OFSS America Inc. ought to have issued further shares in lieu thereof, which had not been done in the present case. The Ld.TPO observed that OFSS America Inc. was authorized to issue 100 shares, out of which only one share had been issued to the assessee at the time of incorporation. 20.4. The Ld.TPO also was of the opinion that OFSS America Inc. could have issued, at the most, 99 additional shares at USD 1 each and, therefore, could have received only USD 99 as capital contribution towards share capital. The Ld. TPO thus held that the difference between USD 12 million and USD 99 represented loan on which the assessee ough....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee to invest in equity or debt. iii. Application of doctrine of meaningless gesture. iv. OFSS America Inc. has not breached the limit of its authorised shares. v. Even if further shares were issued, there would be no breach of authorised shares. vi. US regulations cited by the ld. DR have no bearing on the facts of the case. vii. Other instances of doctrine of meaningless gesture available in public domain. viii. Other evidence showing that USD 12 million is capital contribution. ix. The assessee could not have had any incentive to shift profits out of India." 21.2. The Ld.AR also placed reliance on following decisions to support its argument that, the Department is not entitled to re- characterise a capital contribution transaction as a loan transaction:- • Hon'ble High Court of Bombay in the case of Aegis Ltd. Vs. PCIT [2019] taxmann.com 495 (Bom.) • Decision of the co-ordinate Bench of the Tribunal in ITO vs. Sterling Oil Resources Ltd. reported in (2016) 179 TTJ 298. [This decision has since been confirmed by the Hon'ble Bombay High Court in [2019]108 taxmann.com 645.] 21.3. The Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issued for a consideration, which should not be less than the par value. Therefore, the regulations require a Delaware company to issue shares at a price, which should not be less than the par value. In the instant case, the par value of each share of OFSS America Inc. was USD o.01 (wrongly noted as USD 1 by the ld. DR) is the minimum price for which the shares can be issued and not the maximum price, as alleged by the ld. DR. He thus submitted that the Ld.DR's assertion that OFSS America Inc. was capable of receiving only USD 99 as capital, and therefore, the rest has to be characterised as a loan, gives a complete go by to the concept of issue of shares at a premium, and is ex facie contrary to sections 152 and 153 of the General Corporation Law. 21.6. He further submitted that, OFSS America Inc. had two options while receiving capital contribution of USD 12 million from the assessee. The first option was to invoke the doctrine of meaningless gesture and not issue any further shares and the second option was to issue any number of shares it wanted, as long as such number did not exceed 99, i.e. the remaining authorised shares and receive the capital contribution of US 12 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has never contended that no shares were issued or that the investment remained unallotted; rather, the capital contribution stands duly recorded and recognized in the books of the assessee as well as of OFSS America Inc.. 21.10. The requirement of passing a Board resolution, as referred to by the Ld. DR, would arise only in a situation where a company elects to issue shares in uncertificated form. Since no such case has been made out by the assessee, the question of invoking the said provision does not arise at all. The reliance on the Model Business Corporation Act is, in any event, misplaced, as it is only a model legislation framed by the American Bar Association and has no binding applicability unless specifically adopted by the relevant State law. 21.11. Further, the assessee is the sole and 100% shareholder of OFSS America Inc. In such a wholly owned structure, the question of prejudice, dilution, or any third-party shareholder rights does not arise. The objection raised by the Ld. DR is therefore purely academic, divorced from the factual matrix, and does not impinge upon the validity of the capital contribution or its recognition in the books. 21.12. The Ld.AR als....
X X X X Extracts X X X X
X X X X Extracts X X X X
....million was infused as capital contribution. No additional shares were issued at the time of such infusion and the assessee continued to hold the same one share representing the entire issued share capital. The Ld.TPO re- characterized the said capital contribution as loan on the premise that the authorised share capital was limited and, therefore, the excess amount partook the character of a loan carrying interest. 22.1. In our considered view, the Ld. CIT(A) was justified in deleting the adjustment. Firstly, the Revenue has not brought any material on record to demonstrate that the transaction was, in substance, in the nature of a loan or that there existed any obligation for repayment or payment of interest. In the absence of any such characteristic, a capital contribution cannot be re-characterized as a loan merely on presumptions. It is well settled that the Ld.TPO cannot step into the shoes of the assessee and re-write the transaction entered into by the parties. 22.2. Secondly, the fact that no further shares were issued to a 100% shareholder does not, by itself, alter the character of the transaction. The doctrine of "meaningless gesture," as recognized in the context....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... balance amount to the assessee as consideration for subcontracting of the work to the assessee. The amount paid to the assessee by the AEs towards the aforesaid subcontracts is accounted as cost of sales in books of the AEs. The AEs carry on the distribution of products and services on a principal-to-principal basis. 23.3.1. During the year under consideration the AE's retained Rs. 27,42,03,387/- out of the total customisation fee received from the end customers towards, marketing and customisation work. 23.3.2. It is further, submitted that the assessee also appoints third party distributors for marketing of software products. However, the third party distributors are not assigned the work of sourcing customization work for the assessee. 23.4. The Ld.TPO was of the opinion that no additional marketing function is performed by the AE's to secure the customisation assignment. He noted that once the product is sold to the end customers, and if same requires customisation, the assessee is automatically in a position to customisation services without any significant marketing efforts by the AE's. The Ld.TPO disregarded the TNMM analysis adopted by the assessee for benchmarkin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... customization efforts undertaken by the Appellant. While the services rendered by the distributors are primarily in respect of the products, the services rendered by the subsidiaries are in respect of the overall, services carried out by the Appellant. Consequently, in respect of the sale of products made, commission is paid to the distributors. The latter are not entitled for commission payment on account of customization works done by the Appellant. On the other hand, the subsidiaries got paid on the overall consideration that included receipt on account of customization. Therefore, the finding of the TPO / Additional CIT that in respect of customization, the Appellant is not liable to make payment to the subsidiaries is not correct. Appellant's ARs has vide submission dated 08 March 2018 also placed reliance on various judgments delivered such as Mumbai Tribunal in the case ofSerdia Pharmaceuticals (India) Private Limited Vs. ACIT (ITA Nos: 2469/Mum/06, 3032/Mum/07 and 2531/Mum/08), Gharda. Chemicals Ltd. vs. DCIT (9(1))(ITA No. 2242/Mum/06) and UCB India Private Limited vs. ACIT (2009) (ITA. 428& 429/Mum/2007) supports its contention tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....argues that in addition to the sale of the software, the additional assignments or jobs for collection of customization work is done by the subsidiaries (A.Es.). Ld. Counsel also referred to the sample copy of the agreement, which is placed in the paper book and submits that so far as the local independent distributors are concerned, Some of them are paid between 15 to 20% only on the selling the products of the assessee. He submitted that though the entire customization work is done by the assessee but all the data collection work is done by the subsidiaries. The Learned Counsel supported the order of Learned CIT (A) deleting the addition. 18. We find force in the argument of Learned Counsel. We have also gone through the reasons given by the Learned CIT (A). Though the subsidiaries are not directly involved in the customization work of the software but at the same time they are only authorized to collect the customization work in the market and other independent distributors are not doing said work. It is also seen that some of the independent distributors are paid higher commission then the subsidiaries without doing any job for collection of customization work. Moreove....