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2018 (1) TMI 1711 - AT - Income TaxTP Adjustment - additions in respect of MSS fee paid by the assessee to its AEs - AR submitted that the assessee has entered into Advance Pricing Agreement (APA) u/s. 92CC of the Act with CBDT - contentions of the assessee is that in the past as well in the subsequent assessment years payment of MSS fee by the assessee to its AE has been accepted by the TPO/DRP at arm s length and only for the assessment year under appeal that the TPO has raised doubt over rendering of such services by AE to assessee - HELD THAT - There is no impediment on department in applying the terms and conditions of APA while considering international transactions in the assessment year not covered by the APA, but subject to the condition that the nature of international transactions should be identical in both the situations. In view of the fact that the assessee has entered into APA with the Board, for the subsequent assessment years, without commenting on the merits of the adjustment made, we deem it appropriate to remit this file back to Commissioner of Income Tax (Appeals) to re-adjudicate the issue, in accordance with the aforesaid directions. Accordingly, the appeal of the assessee is allowed for statistical purpose.
Issues:
Transfer Pricing Adjustment on Management Support Services (MSS) fee paid to Associated Enterprises (AEs). Detailed Analysis: Issue 1: Transfer Pricing Adjustment on MSS fee The appeal was against the order of the Commissioner of Income Tax for the assessment year 2010-11, where the Transfer Pricing Officer (TPO) raised concerns over the Arm's Length Price (ALP) of the Management Support Services (MSS) fee paid by the assessee to its AEs. The TPO determined the ALP of MSS to be Nil, resulting in an addition of Rs. 3,15,52,252. The Assessing Officer upheld this adjustment. The Commissioner of Income Tax (Appeals) also confirmed the addition, leading to the appeal before the ITAT Pune. Issue 2: Consistency in Transfer Pricing Adjustments The assessee argued for consistency in transfer pricing treatment, citing previous years where MSS fees were accepted at arm's length by the TPO/DRP. Orders from assessment years 2008-09, 2009-10, and 2012-13 were presented to support this claim. Additionally, the assessee had entered into an Advance Pricing Agreement (APA) with the CBDT for the assessment year 2015-16, covering rollback years from 2011-12 to 2014-15. The APA included transactions similar to those in dispute, suggesting that the TP adjustment should align with the agreement. Issue 3: Application of APA Terms in Non-APA Years The ITAT Pune considered the applicability of APA terms to non-APA years. Referring to a similar case involving an APA, the ITAT Pune decided to remit the case back to the Commissioner of Income Tax (Appeals) for re-examination in light of the APA terms. The tribunal emphasized the need for verification that the international transactions in question for the assessment year under appeal were akin to those covered by the APA. The ITAT Pune highlighted that while APA terms could be applied to non-APA years, the nature of international transactions must remain consistent. Conclusion: The ITAT Pune allowed the appeal for statistical purposes, remitting the case back to the Commissioner of Income Tax (Appeals) for re-evaluation based on the APA terms. The decision underscored the importance of consistency in transfer pricing treatment and the potential application of APA terms to non-APA years, contingent on transaction similarity.
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