2014 (12) TMI 1158 - AT - Income Tax

Transfer pricing adjustment - Royalty payment was at arm s length which cover a substantial part of TPO s disallowance at ₹ 156,43,832/- - Held that - We find that the TPO has made the elaborate order whereby he has only dealt with royalty aspect and not dealt with the other allied payments. The royalty payment has been allowed by the DRP. In these circumstances, assessee will be put to great hardship, if the TPO is given a second inning to make out a fresh case. Hence, we reject these submissions made by the Ld. Departmental Representative. - Decided in favour of assessee. Reimbursement of expenses disallowed - Held that - Interest of justice demands that s the matt4er may be remitted to the file of the A.O. Accordingly, this issue is remitted back to the file of the A.O. A.O. is directed to examine in detail the details and break-up in the time charts submitted by the assessee and thereafter consider the issue afresh - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Addition on account of royalty and allied payments in international transaction.
2. Addition on account of payment of overhead expenses and personal cost in corporate matter.

Analysis:
1. Addition on account of royalty and allied payments in international transaction:
The appeal was filed against the Disputes Resolution Panel's order, which upheld the addition on account of arms-length pricing for allied payments but gave relief on royalty payments. The Tribunal considered the previous order in the case of the same assessee for the Assessment Year 2008-09, where similar additions were made. The Tribunal found that the TPO had made similar additions for royalty and other allied payments in both Assessment Years. The Tribunal noted that the TPO's order lacked detailed discussion on payments other than royalty. The DRP allowed royalty payments but disallowed other allied payments without providing cogent reasons. The Tribunal held that the addition on account of arms-length pricing for allied payments was not sustainable. The Tribunal rejected the request to remit the matter back to the TPO for a detailed finding on allied payments, considering the hardship it would cause to the assessee.

2. Addition on account of payment of overhead expenses and personal cost in corporate matter:
Regarding the corporate issue of reimbursement of expenses to a third party, the Tribunal found a conflict between the submissions of the assessee and the findings of the authorities below. The Assessing Officer had made an ad hoc addition of 50% of expenses without considering the detailed submissions provided by the assessee. The DRP affirmed the Assessing Officer's action, stating that the claim of the assessee lacked supporting evidence. In the interest of justice, the Tribunal remitted this issue back to the Assessing Officer for a detailed examination of the submissions and time charts provided by the assessee. The Tribunal directed the Assessing Officer to consider the issue afresh, ensuring the assessee is given adequate opportunity to be heard.

In conclusion, the Tribunal partly allowed the appeal, favoring the assessee on grounds related to international transactions based on previous orders and remitting the corporate issue back to the Assessing Officer for reexamination. The appeal on interest and penalty was not adjudicated.