TaxTMI 
TaxTMI 
2026 (5) TMI 1868
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.... Annexure 1) dated 10 September 2021 (received by the appellant on 16 September 2021) issued to correct the delay in filing the captioned appeal before Hon'ble Income Tax Appellate Tribunal ('ITAT'). As per the provisions of section 253(3) of the Income Tax Act, 1961, every appeal to ITAT shall be filed within sixty days of receipt of order appealed against. Considering the same, the company wishes to submit that the captioned appeal for AY 2016-17 was due to be filed before Your Honour within 28 May 2021 (i.e. within 60 days from receipt of final assessment order). However, due to state-wide lockdown in West Bengal and the closure of ITAT Kolkata office, the same was filed over the email on 28 May 2021. A copy of acknowledgment of filing appeal documents on appeal within the prescribed timeline of 28 May 2021 is enclosed as Annexure 2. Copy of office order of closure of ITAT office, Kolkata is enclosed as Annexure 3. Further, the Appellant humbly submits, that on resumption of ITAT office the appeal was physically filed on 09 July 2021 (acknowledgement enclosed as Annexure 4). Consequently. the receipt date of physical copy was considered by the ITAT ....
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.... Appellant at Rs. 5,92,47,93,578 under the normal provisions of the Act against the returned total income of Rs. 4,84,91,57,060 under the normal provisions of the Act subsequently revised suo-moto to Rs. 4,87,99,15,842 vide letter dated 28 May 2019 and to Rs. 4,80,67,46,870 vide letter dated 03 December 2019, filed before the Ld. AO and in computing book profit of the Appellant at Rs 11,80,18,28,969 under section 115JB of the Act against the returned book profit of Rs. 11,77,10,70,188 under section 115JB of the Act. 3. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Learned Transfer Pricing Officer ('Ld. TPO') have erred in making an addition amounting to INR 30,44,10,378 on account of advertisement, marketing and promotion ('AMP') expenditure. 3.1. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in relying on extraneous consideration, unsubstantiated presumptions in holding that expenditure towards AMP, unilaterally incurred by the Appellant, is an international transaction under the provisions of Chapter X of the Act. ....
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....y allowed, thereby rendering the impugned adjustment arbitrary, inconsistent and unsustainable. 4. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in making an addition amounting to INR 17,38,30,796 on account of international transaction involving "Payment of Royalty". 4.1. That on the facts and in the circumstances of the case, the Hon'ble DRP has erred in confirming the action of the Ld. TPO in applying the Comparable Uncontrolled Price ('CUP') instead of Transactional Net Margin Method ('TNMM') as applied by the Appellant during the subject year and also accepted by the Ld. TPO himself in the case of the Appellant consistently up till AY 2010-11. 4.2. That on the facts and in the circumstances of the case, the Hon'ble DRP has erred in upholding the addition made by the Ld. AO / Ld. TPO on account of international transaction involving "Payment of Royalty" by applying CUP method as the most appropriate method for certain brands instead of TNMM as adopted by the Appellant at entity level, and restricting the Arm's Length Price of royalty at 2% on the basis ....
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....l transaction involving "Provision of IT Support Services", the Hon'ble DRP has erred in confirming the rejection of certain comparable companies selected by the Appellant, without providing a cogent reason. 5.3. Without prejudice to above grounds of appeal, the Ld. TPO erred in not following directions of the Hon'ble DRP of recomputing the adjustment in the context of international transaction involving "Provision of IT Support Services", with respect to certain comparables. 6. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in making an addition of INR 35,18,360 on account of chargeback at cost, of expenses incurred by the Appellant, by treating the same as 'market support services'. 6.1. That, on the facts and in the circumstances of the case, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in not appreciating that charging of mark-up of 11.05% is not required since the recovery of expenses from the AEs, represents the 'cost only' recharge and the same cannot be treated as rendering of 'market support services'. 6.2. That, on the facts and i....
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....transaction of purchase of equity shares of Reckitt Benck.iser Healthcare India Private Limited by the Appellant from its associated enterprise (i.e. Reckitt Benckiser Singapore Pte. Ltd.), by treating it as an international transaction under the provisions of Chapter X of the Act. 8.1. That, on the facts and in the circumstances of the case, the Hon'ble DRP / Ld. AO / Ld. TPO erred in challenging the valuation methodology opted by the Appellant, without any cogent reason. 8.2. That, on the facts and in the circumstances of the case, the Hon'ble DRP / Ld. AO / Ld. TPO erred in alleging that the Appellant has paid extra cost in relation to purchase of shares resulting into base-erosion. 9. The Ld. AO erred in allocating the residual cost among the eligible and non-eligible units in the ratio of sales and rejecting the basis adopted by the Appellant, 'which was affirmed by the Hon'ble ITAT in the Appellant's own case for AY 2008-09, AY 2009-10, AY 2010-11 and AY 2011-12 as well as by Hon'ble DRP in AY 2012-13, and thereby consequently reducing the deduction under sections 80-IB and 80-IC by Rs. 52,26,56,000. 10. That, on the....
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....ng of appellate proceedings." II. ITA No. 148/KOL/2022; AY 2017-18: "1. That, on the facts and in the circumstances of the case and in law, impugned order of assessment under section 143(3) read with section 144C(13) read with section 144B of the Act, is contrary to law laid down by courts, based on extraneous consideration, unsubstantiated presumptions, ignoring to consider all relevant facts and relevant law, bad in law. 2. That, on the facts and circumstances of the case and in law, the Ld. AO erred on facts and in law in computing the total income of the Appellant at INR 14,48,98,30,229 under the normal provisions of the Act against the returned total income of INR 11,96,95,45,850 under the normal provisions of the Act which was subsequently revised suo-moto to INR 12,23,36,76,850 vide revised return of income dated 27 March 2019 and to Rs. 12,11,15,92,001 as per revised computation filed before the Learned AO on 19 February 2020. 3. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP has not adjudicated the appeal in the lights of the facts relevant to AY 2017-18 and has merely relied on its earlier direct....
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....dice to the above, the learned TPO I AO erred in law and on facts in determining the AMP adjustment by disregarding the principle of intensity-based comparability adjustments, by not following the directions of the Hon'ble DRP, and by deviating from the consistent position accepted in the Appellant's own case in earlier years, wherein such adjustments had been duly allowed, thereby rendering the impugned adjustment arbitrary, inconsistent and unsustainable. Transfer Pricing adjustment on disallowance of payment of Royalty 5. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in making an addition amounting to INR 23,51,26,460 on account of international transaction involving "Payment of Royalty". 5.1. That on the facts and in the circumstances of the case, the Hon'ble DRP / Ld. AO / Ld. TPO has erred in disregarding the business commercial / profile of the Appellant and questioning the wisdom / business prudence of the Appellant. 5.2. That on the facts and in the circumstances of the case, the Hon'ble DRP has erred in upholding the order of the Ld. TPO of restricti....
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....65,830 by determining arm's length price of the royalty paid by the Appellant with respect to sale of imported goods as NIL. Transfer Pricing adjustment on Chargeback of expenses 6. That, on the facts and in the circumstances of the case and in law, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in making an addition of INR 25,58,563 on account of chargeback at cost, of expenses incurred by the Appellant, by treating the same as 'market support services. 6.1. That, on the facts and in the circumstances of the case, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in not appreciating that charging of mark-up of 10.73% is not required since the recovery of expenses from the AEs, represents actual third party costs which are recovered by the Assessee from its AEs on cost-to-cost basis and the same cannot be treated as rendering of 'market support services'. 6.2. That, on the facts and in the circumstances of the case, without prejudice to other grounds, the Hon'ble DRP / Ld. AO / Ld. TPO have erred in rejecting the objections raised by the Appellant highlighting differences in functional and risk profile of comparable compani....
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.... 8. The Ld. AO erred in allocating the residual cost among the eligible and non-eligible units in the ratio of sales and rejecting the basis adopted by the Appellant, which was affirmed by the Hon'ble ITAT in the Appellant's own case for AY 2008-09, AY 2009-10, AY 2010-11 and AY 2011-12 as well as by Hon'ble DRP in AY 2012-13, and thereby consequently reducing the deduction under sections 80-IB and 80-IC by Rs. 47,04,18,900. Corporate Tax Additions - Short-grant of TDS credit 9. The Learned AO has erred in short-granting TDS credit of only INR 12,76,72,448 instead of INR 12,94,15,667 as appearing in Form No. 26AS, as also claimed by the assessee by filing revised computation vide letter dated 19 February 2020 during the assessment proceedings. Corporate Tax Additions - Incorrect Calculation of Interest under section 234C of the Act 10. The Learned AO has erred in computing higher consequential interest under section 234C of the Act. Initiation of Penalty under provisions of 270A of the Act 11. On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under sections ....
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....nsaction, and further the Ld. TPO added a mark-up of 10.59% to the alleged cost of brand promotion activity while applying the Bright Line test under the garb of Cost-Plus Method. The Ld. AO reiterated the order passed by the Ld. TPO. The Ld. DRP while relying on the decision of the Hon'ble Delhi High Court in the case of Sony Ericsson held that there existed an international transaction and also directed exclusion of selling and distribution expenses while calculating the AMP adjustment. The same was incorporated by the Ld. AO and the adjustment as proposed by the Ld. TPO was upheld. The Ld. AR submitted that the issue is decided in favour of the assessee in the assessee's own case for which our attention was drawn to pages 9 to 15 (AY 2013-14 to 2015-16 & 2020-21 and 2021-22); pages 65 to 75 (AY 2010-11 & 2011-12) and pages 98 to 107 (AY 2012-13) of the convenience compilation which contains the copies of the order of the Hon'ble Tribunal. 5.1 The Ld. DR on the other hand, vehemently relied upon the order of the Ld. AO and requested that the Ld. DRP's directions may be confirmed. 5.2 We have considered the submission made. This issue arose in the assessee....
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....ssessee had entered into license agreement with its AE Reckitt Benckiser NV and Reckitt Colman Ltd for transfer and intellectual property right for provision of sale, distribution and marketing of Reckitt Benckiser products. It was manufacturing and distributing various brands of such products and had incurred substantial marketing and promotion expenses in respect of same amounting to Rs. 3,02,43,43,377/-. Such expenses were related to the promotion of the brand owned by the AE of the assessee which were prominently displayed in the advertisement. The TPO further observed that AMP expenses were substantially higher than the comparables selected by the assessee. The excess of such expenses was considered by him to be for brand promotion done for the AE. The TPO, placing reliance upon the decision of Special Bench of ITAT, Delhi in the case of LG Electronics India Pvt. Ltd Vs ACIT, Cir-3, Noida ITA No.5140/Del/2011, held that such brand promotion was to be treated as international transaction u/s 92B of the Act. The TPO applied Bright Line test (BLT) and after applying mark up of 12.27%, based on margin of entities carrying out marketing and advertising activities, made ALP adjustme....
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....s length price adjustment (ALP) made by TPO and confirmed by DRP is not justified for that we rely on the judgment of Hon `ble Delhi High Court in the case of Maruti Suzuki India Ltd V. CIT [2016] 381 ITR 117 (Del-HC), wherein it was held as follows: "66. It is contended by the Revenue that the mere fact that the Indian entity is engaged in the activity of creation, promotion or maintenance of certain brands of its foreign AE or for the creation/ promotion of new/ existing markets for the AE, is by itself enough to demonstrate that there is an arrangement with the parent company for this activity. It is urged that merely because MSIL and SMC do not have an explicit arrangement/ agreement on this aspect cannot lead to the inference that there is no such arrangement or the entire AMP activity of the Indian entity is unilateral and only for its own benefit. According to the Revenue, "the only credible test in the context of TP provisions to determine whether the Indian subsidiary is incurring AMP expenses unilaterally on its own or at the instance of the AE is to find out whether an independent party would have also done the same." It is asserted: "An independent party with a....
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....erit in the contention of the Assessee that the only TP adjustment authorised and permitted by Chapter X is the substitution of the ALP for the transaction price or the contract price. It bears repetition that each of the methods specified in S.92C (1) is a price discovery method. S.92C (1) thus is explicit that the only manner of effecting a TP adjustment is to substitute the transaction price with the ALP so determined. The second proviso to Section 92C (2) provides a 'gateway' by stipulating that if the variation between the ALP and the transaction price does not exceed the specified percentage, no TP adjustment can at all be made. Both Section 92CA, which provides for making a reference to the TPO for computation of the ALP and the manner of the determination of the ALP by the TPO, and Section 92CB which provides for the "safe harbour" rules for determination of the ALP, can be applied only if the TP adjustment involves substitution of the transaction price with the ALP. Rules 10B, 10C and the new Rule 10AB only deal with the determination of the ALP. Thus for the purposes of Chapter X of the Act, what is envisaged is not a quantitative adjustment but only a substitutio....
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....ning issue, the Court was told, that the Indian entity would be entitled to claim such expenses as revenue expense in terms of Section 37 of the Act. It is not for the Revenue to dictate to an entity how much it should spend on AMP. That would be a business decision of such entity keeping in view its exigencies and its perception of what is best needed to promote its products. The argument of the Revenue, however, is that while such AMP expense may be wholly and exclusively for the benefit of the Indian entity, it also ensures to building the brand of the foreign AE for which the foreign AE is obliged to compensate the Indian entity. The burden of the Revenue's song is this: an Indian entity, whose AMP expense is extraordinary (or 'non-routine') ought to be compensated by the foreign AE to whose benefit also such expense enures. The 'non-routine' AMP spend is taken to have 'subsumed' the portion constituting the 'compensation' owed to the Indian entity by the foreign AE. In such a scenario what will be required to be benchmarked is not the AMP expense itself but to what extent the Indian entity must be compensated. That is not within the....
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....sary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance. 76. As explained by the Supreme Court in CIT v. B.C. Srinivasa Setty (1979) 128 ITR 294 (SC) and PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC) in the absence of any machinery provision, bringing an imagined international transaction to tax is fraught with the danger of invalidation. In the present case, in the absence of there being an international transaction involving AMP spend with an ascertainable price, neither the substantive nor the machinery provision of Chapter X are applicable to the transfer pricing adjustment exercise" 27. Our view is also fortified by the decision of the Coordinate Bench of ITAT Kolkata in the case of M/s Philips India Ltd, ITA No.2489/Kol/2017, order dated 04.04.2018 wherein it was held as follows: "11. We have heard the rival submissions. At the outset, we find that the ld TPO, ld AO and the ld DRP had categorically accepted the basic fact that the assessee is a manufacturer and also engaged in distribution of products. While this is so, we are not able to comprehend the argument advanced by the ld DR that assessee is o....
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.... (supra) are applicable to the instant case. Respectfully following the same we dismiss the ground of appeal filed by the Revenue." 28. We note that the AMP transaction does not represent the international transaction between the assessee and its AE's as the revenue failed to bring on record any contract or arrangement between assessee and its AE for making AMP expenses for promotion of brand of its AE. In the assessee's case, the assessee company was not under any obligation to incur AMP expenses and also its parent company had no control over such decisions of RBIL. These are routine advertisement expenses. Therefore, in assessee's case the AMP cannot be regarded as international transaction as held by the Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited Vs. CIT reported in 381 ITR 117 (supra). Therefore, we allow the appeal of the assessee and dismiss the appeal of the revenue and delete the ALP adjustment made by TPO Rs. 104,43,39,401/- for A.Y.2010-11 and Rs.331,09,56,767/- for A.Y. 2011-12." 6.2. Before us, ld. Counsel submitted that there is no material change in the facts of the present case vis-à-vis the earlier t....
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....e order of the Hon'ble High Court and the headnote in this regard is as under: "Section 92C, read with section 92B, of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Adjustments - AMP expenses) - Assessment year 2012-13 - In transfer pricing proceedings, TPO construed that AMP expenses incurred by assessee were international transaction and applied Bright Line Test to make addition - Tribunal deleted said additions holding that since TPO had not established that there was an international transaction entered into by assessee by incurring a higher AMP expenditure, approach of TPO of determining ALP of such AMP expenditure either on BLT bases or TNMM could not be sustained - High Court by impugned order held that in view of judgments in Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT [2015] 55 taxmann.com 240/231 Taxman 113/374 ITR 118 (Delhi) and Maruti Suzuki India Ltd. v. CIT [2015] 64 taxmann.com 150/[2016] 237 Taxman 256/381 ITR 117 (Delhi), no substantial question of law arose against order of Tribunal - Whether special leave petition filed against impugned order of High Court was to be granted - Held, yes [Para 12] ....
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....on was also rejected by the Hon'ble Tribunal. The Ld. AR further submitted that the issue of payment of royalty on imported goods has also been decided in favour of the assessee. Our attention was drawn to pages 15 to 23 (AY 2013-14 to 2015-16 & 2020- 21 and 2021-22); pages 44 to 66 (AY 2010-11 & 2011-12; pages 107 to 117 (AY 2012-12) of the convenience compilation which contains the copies of the order of the Hon'ble Tribunal. 6.1 The Ld. DR on the other hand, vehemently relied upon the order of the Ld. AO and requested that the Ld. DRP's directions may be confirmed. 6.2 We have considered the submission made. This issue arose in the assessee's own case for AY 2010-11 & 2011-12 and AY 2013-14 to 2015-16 & 2020-21 and 2021-22. The Coordinate Bench in the case of the assessee for AY 2013-14 in ITA No. 78/KOL/2018 order dated 18.03.2025 has decided the issue as under: "7.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee's own case for the Assessment Year 2012-13 in ITA No.619/Kol/2017 dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue holding in favour of the assessee. The relevant ....
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....on to its AEs for these imported products and part with only nominal profit margin. Gradually, manufacturing of these products by the assessee locally grows, by setting up manufacturing facilities. Assessee submitted that imported products are marketed and sold by the assessee locally on which it pays royalty to the licensors. Further, it was submitted that products manufactured locally by the assessee on the basis of know-how from the AEs and also exported to the other group entities depending upon their demands. On export sale of its products which are manufactured locally in India, assessee does not pay any royalty to the licensors under the licensing agreements. Assessee thus contended that from the import of finished goods, it is able to earn overall gross margin of 17.31% and is thus creating local demands for these products and at the same time is able to earn better margins inspite of paying royalty for the use of its AEs IPRs. 9.3. AO/TPO did not accept the submission of the assessee and took it as Nil by applying Comparable Uncontrolled Price (CUP) method by holding that with the imported goods, the payment of royalty is embedded and thus, an upward adjustment of....
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.... be permitted by the laws for the time being in force in India. (ii) Royalty equivalent to 8% on exports from India or such other percentage as may be permitted by the laws for the time being in force in India. Any costs either directly or indirectly paid by the Licensee for any and all costs including legal services in relation to any Intellectual Property Rights owned by an RB group entity including without limitation for advise, registry related work, litigation (both civil and criminal counterfeit actions and raid, administrative action, may be deducted from the royalty provided that the Licensee supplies evidence of such payments to the Licensor. The claims for the royalty shall arise at the time of Products sold leave the premises of the Licensee. 6.2. Net sales shall be in accordance with law for the time being in force in India. Article 7 Payment 7.1. A calculation of the amount of royalties due according to article 6 above shall be made at the end of each calendar half year. The Licensee shall send a complete statement by the 20th of the month following a calendar half year and shall transfer the corresponding amount wi....
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.... years. Ld. Counsel thus claimed for application of principle of consistency for which he placed reliance on the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT [1992] 193 ITR 321 (SC). In this respect, he submitted that this principle has been appreciated and upheld by the Coordinate Bench in assessee's own case for the preceding two assessment years (supra). 9.8. Ld. Counsel also contended that it is not within the jurisdiction of the Ld. TPO to test the commercial expediency of an international transaction by applying the benefit test and taking the transaction value at nil. On this contention, he again placed reliance on the decision of Coordinate Bench in assessee's own case for the preceding two assessment years (supra). 9.9. Ld. Counsel reiterated to accept the business model in respect of payment of royalty on the import of finished goods by submitting that as per terms of the license agreement between the assessee and its AE, assessee enjoys the right to manufacture (in own factory) the licensed goods or get the same manufactured from other contractors. Accordingly, the rights granted by the licensor to assessee in ....
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....acture, packaging, sale and distribution of products. In consideration of the rights and Intellectual Property Rights granted by the Licensor under this Agreement, the Importer is required to pay royalty to the Licensor on the basis of Net sales of products sold in India/ exported from India. 20.1 Guidelines to make addition of royalty to the assessable value of imported goods are enshrined in Rule 10(1)(c) of the Valuation Rules, 2007. The said Rule provides that in determining the transaction value, royalties and license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; shall be added to the price actually paid or payable for the imported goods. Explanation :- Where the royalty, license fee or any other payment for a process, whether patented or otherwise, is includible referred to in clauses (c) and (e), such charges shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said proces....
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....pany and its Associate Enterprises (AEs) are concerned. It is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular view or proposition in the past, it is not open for the Revenue to take an entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the TPO/ Assessing Officer on the basis of change in facts. For that we rely on the order of the Hon'ble Supreme Court in Radhasoami Satsang vs. CIT 193 ITR 321 (SC). We are of the view that the above cited precedent on principle of consistency is squarely applicable to the assessee under consideration. In the facts of the assessee's case, the Ld. TPO has not pointed out the change in facts or any provision of law which led him to take a view contrary to the view taken by his predecessors in previous years. We note that the assessee has been paying royalty to its Associate Enterprises(AEs) for a number of years which has been allowed in the assessment of earlier years. Therefore, the TPO cannot take a contrary view and disturb the settle....
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....s 4(a) and 4(b) are allowed." 7.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee's own case in ITA No.619/Kol/2017 for the Assessment Year 2012-13 as extracted above, we are in agreement that we delete the upward adjustment in respect of payment of royalty of Rs. 14,99,95,332/-. Accordingly, grounds 4(a) to 4(e) are allowed." 6.3 We have considered the submissions made. Since the facts of the case are identical to the issue decided in the case of the assessee for AY 2013-14 and in other years, thus, respectfully following the order of the Coordinate Bench we delete the addition of Rs.17,38,30,796/- on account of payment of royalty and the ground nos. 4 to 4.6 of appeal are allowed. 7. Ground nos. 5 to 5.3 relate to the re-determination of Arm's Length Price of the international transaction involving 'provision of IT services' and thereby making an adjustment of Rs.3,04,66,033/-. The Ld. AR submitted that the Ld. TPO held this to be an international transaction and the adjustment as per page 85 to 89 of the Ld. TPO order was proposed. The Ld. DRP followed the directions is....
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....into applications as per business requirement. These include - periodic updates of an application's database, taking adequate data backups before an application is refreshed/ rebooted etc. ● Provide user management services which include invoking and removing the access of users, as is prescribed in the standard operating procedures provided by the Recipient. ● Provide incident resolution to resolve any issues users encounter in the system with respect to data accuracy. ● Implement minor application configurations to resolve issues on data accuracy or to cater to changing business requirement. ● Deploy changes to production environment for any new enhancement or bug fixes to the application. ● Generate and circulate management information reports in relation to organizational processes, framework etc. as may be required by the Recipients from time-to-time." 12.1. In this respect also, Ld. Counsel referred to charts prepared for taking the correct comparables based on the functional profile arrived at after undertaking FAR analysis and economic analysis, details of which are placed in the paper b....
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....r passed by the Ld. TPO. The Ld. DRP while following the directions issued for AY 2014-15 and AY 2015-16, directed the Ld. TPO to recompute adjustment accordingly and the same was incorporated by the Ld. AO in the final order. The Ld. AR submitted that there was no adjudication by the Ld. TPO or the Ld. DRP as to what service was rendered. The expenses in question were in respect of system upgrade of the assessee which costs were reimbursed to the assessee by the AE. Hence, there was no element of any service that the assessee rendered to the AE. Additionally, there was no comment/adjudication on the evidences which were filed before the Ld. TPO and Ld. DRP to establish that these were cost to cost reimbursements. The Ld. AR drew our attention to pages 1275 to 1283, 1373 to 1378 of paper book-I (Vol-III) in this regard which had neither been considered nor commented on by the Ld. TPO or the Ld. DRP. Further, the Ld. AR submitted that in the absence of any income element, there was no question of invoking the provisions of Chapter-X and without prejudice, no method has been applied by the Ld. TPO or the Ld. DRP to benchmark this transaction if at all. It has not been established as ....
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....by the Ld. TPO or Ld. DRP as to what services were rendered. According to him, expenses in question were in respect of system upgrade of the assessee for which costs were reimbursed to the assessee by the AEs. It was contended that there were no element of any services that the assessee rendered to the AEs. Ld. Counsel further submitted that there is no adjudication on the evidence which were furnished in the course of assessment before the Ld. TPO and the Ld. DRP so as to establish that these were cost to cost reimbursement. According to him, since there is no income element, there was no question of invoking the transfer pricing adjustment on this transaction. Further, he alleged that no method has been applied by the Ld. TPO or Ld. DRP to bench-mark these transactions. According to the Ld. Counsel, this issue was remanded back to the Ld. TPO in the assessee's own case for AY 2010-11 and 2011-12 (supra) and submitted that this ground may also be remitted back to the file of Ld. TPO. 15.3. Considering the facts on record and the submissions made before us as well as perusing the order of Coordinate Bench in the assessee's own case for the preceding two years (supr....
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....f paper book-I, economic analysis at pages 230 to 236 of paper book-I and the submission regarding services provided at page 1082 to 1087 of paper book-1 (Vol. III). 9.1 The Ld. DR on the other hand, vehemently relied upon the order of the Ld. AO and requested that the Ld. DRP's directions may be confirmed. 9.2 We have considered the submission made. This issue arose in the assessee's own case for AY 2010-11 & 2011-12 and AY 2013-14 to 2015-16 & 2020-21 and 2021-22. The Coordinate Bench in the case of the assessee for AY 2013-14 in ITA No. 78/KOL/2018 order dated 18.03.2025 has decided the issue as under: "8.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee's own case for the Assessment Year 2012-13 in ITA No.619/Kol/2017 dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue has remanded back to the file of Ld. TPO. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: "11. Ground no. 5(a) to 5(c) is in respect of upward adjustment of Rs. 1,12,45,571/- for R&D services. In the Transfer pricing assessment, ld. TPO rejected certain com....
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....he material on record and arrive at the benchmarking in accordance with the provisions of law. Assessee is at liberty to furnish any further details in this respect to justify its benchmarking of ALP of the transaction. Accordingly, ground nos. 5(a) to 5(c) are allowed for statistical purposes." 8.2 Considering the facts of the present case and the applicable law as well as the recent decision of Coordinate bench in assessee's own case in ITA No.619/Kol/ 2017 for the Assessment Year 2012-13 as extracted above, we find it proper to remit the matter back to the file of Ld. TPO. Accordingly, ground nos. 5(a) to 5(f) are allowed for statistical purposes." 9.3 We have considered the submissions made. Since the facts of the case are identical to the issue decided in the case of the assessee AY 2013-14 and in other years, thus, respectfully following the order of the Coordinate Bench we remit this issue to the Ld. TPO to adjudicate upon the issues raised by the assessee and recompute as per the functional profile provided by the assessee. Hence, the ground nos. 7 to 7.3 of appeal are allowed for statistical purposes. 10. Ground nos. 8 to 8.2 relate to the adjustment of ....
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....an entity and its foreign AE, the issue of transfer of fund from India to offshore is also required to be kept in mind by a TPO for proper evaluation of purchase price of shares. The undersigned is neither altering the price valued by the authorised valuers nor extrapolating any other value from outside. The assessee has also failed to come up with any acceptable and cogent reason for choosing the higher purchase price of shares. The point of consideration, in this issue, is not whether purchase of share is an international transaction or not but whether assessee has paid any extra cost in relation to the purchase of those shares which results into base erosion in the light of the discussion made above. Accordingly, the undersigned considers the purchase value of shares @ Rs.3312 as the ALP value adopting "Other Method" as MAM. Thus, the required downward adjustment to made in respect to purchase of shares is (3315-3312)*2262443, i.e. Rs.67,87,329." 10.1 The Ld. AR submitted that the Ld. AO affirmed/incorporated the order passed by the Ld. TPO in this regard. The Ld. DRP vide its order upheld the actions of the Ld. TPO and the same was incorporated by the Ld. AO in the ....
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....on'ble Bombay High Court in the case of Vodafone (infra) which the Tribunal has considered and followed while deciding the case of the Assessee for AY 2010-11. When the transaction of purchase of shares are held to be outside the purview of the provisions of Sec.92 of the Act, we fail to understand as to how the excess price paid for acquiring shares can be treated as a deemed loan and an international transaction. We therefore find no merits in the argument advanced by the learned DR. 16. We find that identical issue as to whether the transaction of purchase of shares of AE can be subject matter of proceedings u/s.92 of the Act came up for consideration in Assessee's own case in AY 2010-11 and the ITAT in ITA No.1053/Kol/2017 and ITA No.966/Kol/2017 for AY 2010-11 dated 22.9.2017 held that the transaction of purchase of shares of AE cannot be regarded as international transaction and cannot be subject matter of investigation u/s. 92 of the Act. The following were the relevant observations of the Tribunal: "14 We may mention here that if the preliminary objection that the transaction of investment in shares is on capital account and is therefore outside th....
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....Union Cabinet while accepting the Bombay High Court order, dated 10.10.2014, specifically noted the following observations: .... b) The crucial words "shall be chargeable to income tax" which are found in Section 42(2) of the 1922 Act are absent in Chapter X of the Act Therefore it is clear that the deemed income which was charged to tax under Section 42(2) of 1922 Act was done away with under this Act. " c) The tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of Arm's Length Pricing to transactional value/ consideration itself does not arise." d) If its income which is chargeable to tax, under the normal provisions of the Act, then alone Chapter X of the Act could be invoked. Sections 4 and 5 of the Act brings / charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2 (24) of the Act. The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capital account can....
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....of the Assessee, the other grounds with regard to the quantification of ALP does not arise for consideration and are dismissed as infructuous." 17. Respectfully following the decision of the Tribunal referred to above, we hold that the determination of ALP in the present case cannot be sustained as the transaction in question is on capital account and determination of ALP in respect of such transactions is outside the purview of Chapter X of the Act. Consequently, the addition made by the AO in this regard is directed to be deleted. Since the preliminary ground on the issue of jurisdiction is held in favour of the Assessee, the other grounds with regard to the quantification of ALP does not arise for consideration and are dismissed as infructuous." 10.4 Further, the Ld. AR submitted that this issue is also covered by the decision of Hon'ble Bombay High Court in the case of Vodafone India Services (P.) Ltd. (supra) in which it has been held that "Issue of shares at a premium by assessee to its non-resident holding company does not give rise to any income from an admitted international transaction and, thus, there is no occasion to apply chapter X in such a case." ....
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....his issue arose in the assessee's own case for AY 2010-11 & 2011-12 and AY 2013-14 to 2015-16 & 2020-21 and 2021-22. The Coordinate Bench in the case of the assessee for AY 2013-14 in ITA No. 78/KOL/2018 order dated 18.03.2025 has decided the issue as under: "13.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee's own case in ITA No. 404/ Kol/2015 & ITA No.625/ Kol/2016 for Assessment Years 2010-11 to 2011-12 order dated 17/06/2020, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: "Grounds relating to Corporate Tax issue 38. Summarized ground No. 1 of corporate tax issue reads as follows: "1. Apportionment of expenses between fiscal units, non-fiscal units and head office of Rs. 261,160,962/-. This ground covers ground No.8 of revenue's appeal in ITA No.529/Kol/2015 for A.Y. 2010-11 and ground nos. 1 and 2 of revenue's appeal in ITA No.518/Kol/2016 for A.Y.2011-12." 39. When this issue was called out for hearing, the ld. Counsel for the assessee invited our at....
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.... allowing deduction u/s 80-IB and 80- IC, as done by the revenue authorities is unsustainable. The apportionment is directed to be deleted. Ground No.3 raised by the assessee is allowed. 5. As far as Ground No.2 raised by the revenue is concerned, this issue again pertains to apportionment of residual cost of Rs.40.43 crores. The total cost as per the Profit & Loss A/ c of the assessee is a sum of Rs. 717.26 crores. The details of the other expenses is given in Schedule 16 to the Profit & Loss A/c. As far as residual cost is concerned, the assessee allocated residual cost amount to the eligible and non-eligible units in the ratio of number of employees at the corporate office who are directly involved in the management of these eligible units like production, procurement, quality, logistics etc. to the total number of employees at the corporate office. According to the assessee these expenses primarily relates to the corporate office of the company. The benefit of which is derived by the whole organization including the eligible units, the allocation of cost incurred on account of residual cost among eligible and non-eligible units should have to be done in the ratio of el....
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....corporate office who are directly involved in the management of these eligible units to the total number of executives at the corporate office as has been done by the assessee company. This is because the expenditure incurred by the assessee company on the residual functions have also been used and benefited the whole company including the eligible units hence it has to be bifurcated in the ratio of total workforce of the eligible units with total number of workers of the company to arrive at the correct and true profit. This is also supported by the fact that on an average all the expenditures which has either been bifurcated in the ratio of sales or on the basis of actuals are in the percentage of almost average of 22% whereas the percentage of these particular expenditures are around 5.69%. This itself proves beyond doubt that this expenditure has not been bifurcated properly by the assessee company. Moreover, the assessee's arguments that the accounts of the company are audited does not have a bearing on the deduction being claimed u/s 80IB/IC of the Act. The income- tax Act specifically provides that the profits of these undertakings is required to be computed in ....
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....erated the stand of the Assessing Officer as reflected in the order of the assessment. The ld. Counsel for the assessee relied on the order of the ld. CIT(A). We have given a careful consideration to the rival submissions, we note that the basis of allocation of residual cost to the eligible units has been done by the Assessing Officer is as follows: PARTICULARS JAMMU BADDI PARWANDO (LIQUID) PARWANOO (SOAP) TOTAL Deduction claimed by the assessee as per Auditors' Certificate in Form 10CCB 1,108.06 1,519.14 2,044.55 1,493.27 6,165.02 Add: Allocation of residual cost by the assessee 38.62 42.17 116.22 32.82 229.83 Less: Allocation of residual cost as per assessment order 1.146.68 76.16 1,561.31 83.16 2,160.77 229.19 1,526.09 64.73 6,394.85 453.24 Less: Allocation of bad debt not allocated to eligible units 1,070,52 0.22 1,478.15 0.24 1,931.58 0.67 1,461.36 0.19 5,941.61 1.32 Revised deduction 1,070.30 1,477.91 1,930.91 1,461.17 5,940.29 It can be seen from the above Chart that the allocation done by the assessee on the basis of number of employees who are directly ....
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....that the units had changed but the claim was raised subsequently. The Ld. AO has started this issue from AY 2015-16. The Coordinate Bench of the Tribunal from AY 2005-06 onwards decided the issue in favour of the assessee and our attention was drawn to page 31 of the convenience compilation para 13.1 as reproduced above. It was noted that in para 13.1 the Coordinate Bench of the Tribunal had reproduced the order of AY 2005-06 and the corporate expenses were allocated on the basis of number of employees, which the Ld. AO had allocated on the basis of turnover between eligible and non-eligible unit. The Ld. CIT(A) in AY 2005-06 has decided that the turnover cannot be the basis but the allocation can be done on the basis of the number of employees which was approved by the Tribunal as per page 35 and the Tribunal approved the order of the Ld. CIT(A). 11.4 We have considered the submissions made. In view of the decision of the Coordinate Bench of the Tribunal this issue is decided in favour of the assessee. However, since the deduction u/s 80-IB & 80-IC of the Act are allowable only for a specific period, the Ld. AO shall examine the same and shall follow the decision of the Coordin....
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....n the preceding AY 2015-16 on section 14A issue, without appreciating that the issue in question was of the alleged undisclosed interest and not disallowance made u/s 14A of the Act. The same was incorporated by the Ld. AO in the final order. The Ld. AR further submitted that the Ld. AO while making such an addition completely failed to appreciate that the provisions of section 115JB of the Act is a complete code in itself and any adjustment thereof is permissible to the extent provided under explanation 1 to section 115JB of the Act. Since the addition on account of interest income received on refund of income tax is not provided under Explanation 1 to section 115JB of the Act, the addition made by the Ld. AO is impermissible in the eyes of law. He also submitted that reliance of the Ld. DRP on the findings for AY 2015-16 also stands reversed by the Coordinate Bench of the Tribunal vide order dated 18.03.2025 in the assessee's own case for AY 2015-16 and in this respect our attention was drawn to page 38 to 40 of the convenience compilation which contains the copy of the Tribunal order. 13.1 The Ld. DR on the other hand, vehemently relied upon the order of the Ld. AO and re....
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....mently relied upon the order of the Ld. AO and requested that the Ld. DRP's directions may be confirmed. 16.2 We have considered the submission made. This issue arose in the assessee's own case for AY 2010-11 & 2011-12 and AY 2013-14 to 2015-16 & 2020-21 and 2021-22. The Coordinate Bench in the case of the assessee for AY 2013-14 in ITA No. 78/KOL/2018 order dated 18.03.2025 has decided the issue as under: "15.1 At the outset, Ld. Counsel for the assessee submitted that in the assessee's own case for the Assessment Year 2012-13 in ITA No.619/Kol/2017 dated 20.07.2023, the Coordinate Bench of ITAT, Kolkata has dealt with this identical issue has remanded back to the file of Ld. TPO. The relevant extract on the finding given by the Coordinate Bench in this issue is reproduced as under: "18. On the first additional ground relating to non-granting of benefit of Double Tax Avoidance Agreement (DTAA) between India- UK and India-Spain respectively, qua the right of tax towards payment of dividend to the shareholders, assessee has raised this additional ground to claim that while distributing dividend to the non- resident shareholders, the beneficial right ....