TaxTMI 
TaxTMI 
2026 (5) TMI 215
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....22] 4. Brief facts of the case are that the assessee company engaged in global freight forwarding and logistics services and operates in 03 segments namely, airfreight, ocean freight and ocean services; custom brokerage; and import services. The case of the assessee was selected for scrutiny under CASS for various reasons and a reference was made to the Transfer Pricing Officer ("TPO") for determining the Arm's Length Price ("ALP") of international transactions carried out by the assessee during the year under appeal. The TPO vide its order dated 28.07.2023 passed the order wherein following adjustments are proposed:- S. No. International Transaction Amount (In INR) 1. Sale of logistics Services 1,46,37,41,000/- 2. Royalty paid/payable 17,64,25,299/- 3. Provision of Software Development 1,04,25,000/- 4. Global accounts manager expenses paid 5,80,64,686/- 5. Leaseline Charges paid 82,89,622/- Total 1,71,69,45,607/- 5. Thereafter, the said order was rectified in terms of the order passed u/s 154 of the Act dated 15.09.2023 accordingly, the adjustments were reduced from INR 1,71,69,45,607/- to INR 103,40,32,60....
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.... Adjustment as discussed above (original TP adjustment adopted subject to rectification and adoption of revised figures on receipt of TPO revised proceedings) INR 82,16,09,985 (iii) Deduction disallowed u/s 80G INR 47,61,318 9. Aggrieved by the said order, assessee preferred appeal before the Tribunal wherein alongwith appeal memo as many as 45 Grounds of appeal were taken, which were later modified and concise Grounds of appeal are filed which reads as under:- 1. "That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant at INR 4,16,17,21,438 in pursuance to the directions issued by the DRP, as against the returned income of INR 1,89,06,33,990. 2. That on the facts and circumstances of the case and in law, the final assessment order dated October 29, 2024 passed by the AO is barred by limitation and thus, bad in law and liable to be quashed, as it has been passed beyond the time frame prescribed under section 153(1) read with section 153(4) of the Act. 3. That the Final Assessment Order dated 29.11.2024 is not in conformity with the directions of the DRP in terms of Section....
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....g to INR 55,83,76,685 in respect of the international transactions pertaining to payment of royalty: 10. That on the facts and circumstances of the case and in law, the TPO has erred in making and the AO/DRP have erred in upholding the transfer pricing adjustment of INR 55,83,76,685 in respect of the international transaction pertaining to payment of royalty alleging the same to be not at arm's length and without considering the submissions made by the Appellant in this regard. 11. That on the facts and circumstances of the case and in law, the AO/TPO/DRP have erred in disregarding the arm's length price determined by the Appellant in its transfer pricing documentation maintained under section 92D of the Act and Rule 10D of the Rules, and in arbitrarily rejecting the benchmarking analysis and methodology adopted by the Appellant using aggregated Transactional Net Margin Method (TNMM") for the international transaction of royalty payment. Further, have erred in applying the Comparable Uncontrolled Price ("CUP") method and selecting functionally incomparable royalty agreements/companies, without appreciating the Appellant's functional asset and risk ("FA....
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....e being any mark-up. 19. That on the facts and circumstances of the case and in law, the AO/TPO/ DRP have erred in not appreciating that the Hon'ble Tribunal, in previous years, had upheld that the subject transaction is in the nature of pure re-imbursements, not liable for any deduction of taxes. 20. That the AO/TPO/DRP erred in not appreciating that once the GAM expenses stood subsumed in the cost base for the purposes of benchmarking the Logistics segment, a separate adjustment on such account was not warranted. 21. That on the facts and circumstances of the case and in law, the AO/TPO/DRP have erred in alleging that the Appellant failed to maintain records to substantiate receipt of GAM services, benefits derived, and costs incurred by the AE, and in characterizing the GAM expenses as duplicative services without appreciating the nature of the transaction and the detailed submissions furnished. Further, erred in considering "actuarial man-hours" as the appropriate basis for cost allocation, disregarding the Appellant's explanations and supporting evidence. Corporate tax grounds 22. That on the facts and in the circumstances o....
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.....2024 & 16.07.2024, copy of which are placed at pages 424 onwards. The assessee further claimed that these details were again filed alongwith the rectification application u/s 154 of the Act before AO/TPO. However, in the order giving effect, AO/TPO observed that assessee has not provided any data which is contrary to the facts as observed above. Looking to these facts, this issue is restored back to the file of AO/TPO with the directions to provide working capital adjustments for benchmarking the international transactions of software development services after considering the details and data provided by the assessee as stated above. With these directions, Grounds of appeal Nos. 3 to 6 raised by the assessee are allowed for statistical purposes. 13. Ground of appeal Nos.7 to 22 raised by the assessee are with respect to transfer pricing adjustment towards sale of logistic service of INR 58,57,09,000/-, on account of Royalty paid of INR 17,64,25,299/- and towards Global Accounts Manager ("GAM") expenses of INR 5,80,64,686/-. Before us, Ld.AR for the assessee submits that the assessee has benchmarked its logistics segment by adopting by combined approach under TNMM where the tot....
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.... has accepted the filters applied by the assessee and also the method applied as TNMM as per which OP/OC was computed at 5.93%. The TPO further include three new filters and out of Eleven comparables selected by assessee, accepted total Seven comparables and rejected remaining Four comparables. Besides this, TPO has also included three new comparables and accordingly, final set of Ten comparables was considered and computed the mean margin at 10.75% and proposed the adjustment of INR 8496.927 Lakhs. Thereafter, assessee's objections were considered by the TPO and finally after including Five more comparables and excluding One comparable, total Fourteen comparables were taken as final set of comparables and worked out OP/OC at 13.96% which has resulted into the adjustment of INR 1,46,37,41,000/-. The said adjustment was rectified by the AO at INR 78,08,28,000/- and after the order of DRP, it is reduced to INR 58,57,09,000/-. It is relevant to state herein that operating cost taken is inclusive of Royalty charges and GAM expenses paid by the assessee. Besides this, the AO/TPO has separately computed the ALP for Royality payment where, as against Royalty paid @ 5% by assessee, the TPO....
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....Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the TNMM had to be applied by the TPO/AO in respect of the technical fee payment too." 14. The identical ratio has been laid down in plethora of cases relied by the Assessee mentioned as mentioned in previous Para No. 8 of the order. 15. Considering the above facts and circumstances and following the ratio laid down by the Hon'ble High Court of Delhi in the case of Magneti Marelli Power train India Private Limited (supra) and other judicial precedents, we find merit in the Ground No. 1 of the Assessee and accordingly we delete the addition made by the A.O." 17. As the facts in the case of the assessee are identical, thus, by respectfully following the a....
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....te bench of ITAT Bangalore in case of First American (India) Pvt. Ltd v. ACIT in ITA No. 1762/Bang/2019 vide its order dt. 29.04.2020 has allowed the deduction under Section 80G by making following observations: "15. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", whereas monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 16. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession". 17. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under se....
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....other provision or Chapter, to say donations made to a charitable trust registered under Section 80G and if the same is denied merely because such payment forms part of CSR, it would lead to double disallowance, which is not the intention of Legislature. Accordingly, we allow the deduction claimed by the assessee u/s 80G of the Act. The Grounds of appeal Nos. 23 & 24 raised by the assessee are thus, allowed. 23. Ground of appeal No.25 raised by the assessee is not allowing the credit of TDS. 24. Heard the contentions of both the parties at length and perused the material available on record. The AO is directed to verify the claim of the assessee of TDS vis-a-vis income declared on which such TDS is made and decide the issue in accordance with law. 25. Ground of appeal No.26 raised by the assessee is with respect to disallowance of INR 89,72,008/- u/s 43B of the Act. 26. Heard the contentions of both the parties at length and perused the material available on record. Before us, Ld.AR submits that adjustment is made in the return processed u/s 143(1) without confronting the assessee therefore, in the interest of justice, this issue is restored back to the file of AO with ....