2018 (12) TMI 1985 - AT - Income Tax

TP Adjustment - international transaction pertaining to availing support and management services by the Appellant from its Associated Enterprise ( AE ) - HELD THAT - It is noticed that a similar issue having identical facts was a subject matter of the assessee s appeals for the preceding assessment years 2012-13 and 2013-14 2018 (8) TMI 126 - ITAT DELHI respectively wherein the matter has been restored to the file of the TPO wherein TPO is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. Assessee is directed to furnish the details of services utilised by it for which it has made the payments to its AEs. Assessee is further directed to demonstrate what benefits it has received from its AEs. TPO is directed to consider the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Addition of income in international transaction.
2. Rejection of comparables by TPO.
3. Withholding tax credit.
4. Penalty proceedings under section 271(1)(c) of the Act.
5. Consequential interest under section 234B and 234C of the Act.

Analysis:

Issue 1: Addition of income in international transaction
The appeal was filed against the AO's order under section 143(3)/144C of the Income Tax Act regarding an addition of INR 69,864,774 to the total income of the appellant in relation to international transactions for support and management services from its Associated Enterprise (AE). The appellant contested the reliance on the tangible benefit test by the TPO/AO/DRP, questioning the commercial rationale of the transactions for ALP determination. The Tribunal noted similar issues in prior years and remanded the matter back to the TPO for fresh adjudication.

Issue 2: Rejection of comparables by TPO
The TPO's rejection of comparables was challenged by the appellant, highlighting discrepancies in the TPO's reasoning. The Tribunal found that both the appellant and TPO needed to conduct a fresh search for comparables with functional similarity in the sales and post-sales support segment. The TPO was directed to reconsider the issue after giving the appellant a reasonable opportunity to be heard.

Issue 3: Withholding tax credit
The appellant's claim for full credit of withholding tax credit was not granted by the AO, leading to a challenge in the appeal. However, no specific details were provided in the judgment regarding the grounds for the claim or the AO's reasoning for denial.

Issue 4: Penalty proceedings under section 271(1)(c) of the Act
The AO initiated penalty proceedings under section 271(1)(c) of the Act, which was contested by the appellant. The judgment did not elaborate on the specific reasons for the penalty proceedings or the arguments presented by the parties.

Issue 5: Consequential interest under section 234B and 234C of the Act
The AO charged consequential interest under sections 234B and 234C of the Act, which was challenged by the appellant. The judgment did not provide detailed insights into the basis for charging interest or the appellant's contentions against it.

In conclusion, the Tribunal remanded the issues back to the TPO for fresh adjudication based on the findings from prior years. The appeal was allowed for statistical purposes, and the Stay Application was dismissed as infructuous. The judgment emphasized the need for a thorough reconsideration of the issues raised by the appellant, particularly regarding international transactions and the selection of comparables.