TaxTMI 
TaxTMI 
2026 (8) TMI 1770
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....ion, void-ab-initio and therefore, ought to be quashed and set aside in toto, General 2. On the facts and in the circumstances of the case and in law, the ld. AO erred in making an addition of Rs. 1,78,97,264 and assessing the total income of the Appellant at Rs. 5,39,85,000 as against returned income of Rs. 3,60,87,730 and consequently raising a tax demand of Rs. 45,99,680 based on the order passed by the TPO and the directions issued by the Hon'ble DRP. Transfer Pricing Grounds (a) Incorrect addition of Rs. 1,07,65,480 by applying a mark-up of 20% on reimbursement of expenses received by the Appellant 3. On the facts and circumstances of the case and in law, the ld. AO/TPO/DRP erred in not accepting that reimbursement of expenses received by Appellant are third party costs incurred by it on behalf of its associated enterprises (AEs) / group companies which were recovered on a cost-to-cost basis and thus, a mark-up of 20% cannot be applied to these costs. 4. On the facts and circumstances of the case and in law, the ld. AO/TPO/DRP have erred in not considering the order passed by the Hon'ble Tribunal, Delhi Bench, in th....
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....in not allowing the additional claim made by the Appellant for deduction of taxes paid outside India amounting to Rs. 4,56,189 under section 37 of the Act (credit of which is not available under section 90 of the Act) on the basis that the same has not been claimed in the Return of Income. The Appellant prays that the Ld. AO be directed to allow the deduction of Rs. 4,56,189 under section 37 of the Act. Levy of interest under section 234D of the Act 11. On the facts and in the circumstances of the case and in law, Ld. AO erred in levying interest under section 234D of the Act amounting to Rs. 332,145. Short grant of interest under section 244A of the Act 12. On the facts and in the circumstances of the case and in law, Ld. AO erred in computing the interest to be granted under section 244A of the Act. Initiation of penalty proceedings under section 271AA 13. On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271 AAA of the Act. The Appellant prays that the Ld. AO be directed to drop the penalty proceedings initiated under section 271 AA of the....
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....1 BBC Studios India Private Limited Salaries, wages and bonus 23,04,908 2 BBC Studios Distribution Ltd, U.K. Salaries, wages and bonus 18,03,431 3 BBC World Service India Private Limited Salaries, wages and bonus 2,85,70,877 4 BBC Global Singapore Pte. Ltd. Salaries, wages and bonus 85,39,679 5 BBC Studios India Private Limited Other Expenses 3,75,000 6 BBC Global News Limited, U.K. Business promotion expenses 1,05,83,536 7 BBC World Service India Private Limited Other Expense 16,49,972 Total 5,38,27,403 5. Further, he submitted that the TPO vide order dated 31.07.2023 held that the assessee has failed to establish how the employees of assessee provided services to the domestic AEs and group companies and thereafter applied a 20% mark-up on the entire amount (Rs.5,38,27,403), treating all reimbursements as being relating to MSS provided by the assessee to its foreign AEs. 6. He further submitted that transactions with domestic group entities (Sr. No. 1, 3, 5 & 7 aggregating to Rs. 3,29,00,757 as given in the above chart fall outside transfer pricing provisions. It is submitted that costs re....
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....r than enhancing it by applying a 20% mark-up. He submitted that the TPO could not have applied the cost+20% model to reimbursements on the ground that the employees of assessee were incapable of providing services to its AEs. 11. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below. 12. Considered the rival submissions and material placed on record. We observed that the assessee had incurred certain expenses on behalf of group entities and its foreign AEs and recovered the same as reimbursement on cost to cost basis. On careful consideration, we observed that the assessee had incurred and recovered the expenses relating to salaries, wages, bonus and other expenses like business promotion and other related expenses to the extent of Rs. 538,27,403/-. The TPO considered the same as provision of services to the AEs and made TP adjustments on the above recovery at the rate of 20% as mark up. Before us, the assessee had brought to our attention that the above reimbursement was made from the domestic group entities to the extent of Rs. 329,00,757/-, towards promotions expenses of Rs. 105,83,536/- and towards other expenses of Rs. 20,24,972/- (which....
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....ther employees of the group AEs, in absence of such detailed information like service or log sheet of sharing the services or obtaining services, it is not possible to determine the exact nature of transactions. Therefore, we inclined to sustain the above issue alone. In the result, grounds raised by the assessee is partly allowed. 16. With regard to Grounds No.6 to 9 regarding Transfer Pricing issue relating to payment of license fee transaction (Transfer Pricing Adjustment of Rs. 71,31,784/-), ld. AR submitted that in consideration of the distribution rights obtained by the assessee from its AE (i.e. BBCWD), the assessee paid a distribution/license fee of 25% of net distribution revenues(total: Rs. 2,58,77,299). He submitted that in TP Study, the assessee benchmarked this transaction under Transactional Net Margin Method (TNMM) with software/IT product distributors as comparables. 17. He further submitted that as per the TNMM benchmarking analysis, assessee's operating profit to operating revenue (OP/OR) of 4.26% was higher than the arm's length range of comparable companies ranging from 13.9% to 2.03% with a median of 1.76%, therefore, the transaction is considered....
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....es. 19. With regard to arbitrary modification of supplementary benchmarking, without prejudice, he submitted that if the Bench does not accept software /IT product distribution companies for benchmarking the license fee payment, the assessee is submitted as under :- * All eight comparable agreements should be accepted. Since the assessee's license fee falls within the arm's length range, the transaction should be accepted as being at arm's length. * Without prejudice to the contention that all eight agreements should be considered, the assessee had submitted before the Ld. DRP that Peak Entertainment Ltd. is similar to Warner Home Video Inc., which was accepted by the Ld. TPO in the TP Order dated 31 July 2023. However, in the Order Giving Effect dated 29.07.2024, the Ld. TPO did not include Peak Entertainment Ltd. and rather excluded Warner Home Video Inc. without any direction from the DRP. Such exclusion is arbitrary and unsustainable. * Accordingly, the following four comparable agreements should be accepted: (i) Televisa SA de CVV Univision Communications Inc. (ii) CorTech Communications Inc., Wombat Productions Home Box ....
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....ch Communications Inc., c) Warner Home Video Inc. and d) Peak Entertainment Ltd/ The Silly Goose Co. LLC, to bench mark the ALP under CUP method after giving proper opportunity of being heard to the assessee. In the result, the grounds raised by the assessee are allowed for statistical purposes. 24. With regard to Ground No.10 relating to corporate tax - claim of taxes paid outside India under section 37 of the Act of Rs. 4,56,189/-, ld. AR submitted that the assessee earned foreign sourced income from Sri Lanka on which taxes amounting to Rs. 7,14,013/- paid. Relief claimed u/s 90/91 amounting to Rs. 2,57,824 and vide submission dated 14.09.2023 an additional claim for deduction of balance tax amounting to Rs. 4,56,189/- under section 37 of the Act made. He submitted that details of FTC, Form No.67 and withholding tax certificates is placed at pages 914-963 of the paper book. He further submitted that foreign taxes ineligible for credit u/s 90/91 of the Act can be claimed as deduction u/s 37(1) of the Act and such claim is not debarred by virtue of provisions of section 40(a)(ii) of the Act. In this regard, he relief on the following decisions :- * Reliance Infrastruct....