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2017 (12) TMI 1117 - AT - Income TaxTPA - comparable selection criteria - Held that - Assessee is engaged in cutting edge product without appreciating that the products are not conceptualized in India and hence the role of PSC is limited to only that of a routine captive service provider, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Depreciation claimed by the assessee @ 30% on moulds on the ground that these are used in plastic factories - Held that - AR has just verbally submitted that in most of the products which are manufactured by the assessee are made up of plastic product which appears to be true. But as such no documentary evidence was filed in support of the assessee claim. However in the interest of justice & fair play, we are inclined to restore this matter to the file of AO for fresh adjudication in accordance with the law. The ld. AR is directed to produce necessary documents in support of his claim. Hence the ground of appeal filed by the assessee is allowed for statistical purposes. Credit of tds - Held that - We direct the AO to grant the amount of TDS as per the provision of law Surcharge on DDT - Held that - On perusal of records, we find that the surcharge applicable for the AY 2011-12 is 7.5%. But it is undisputed fact that dividend was declared and distributed and paid in AY 2012-13 and therefore the surcharge as applicable to the AY 2012-13 i.e. @ 5% should be applied on the DDT. In view of above, we direct the AO to delete the extra surcharge levied on the DDT Addition on AMP expenses as international transaction - Held that - AMP cannot be regarded as international transaction. In holding so we find the support & guidance from the judgment of Hon ble Delhi High Court in the case of Maruti Suzuki India Limited Vs. CIT 2015 (12) TMI 634 - DELHI HIGH COURT Addition on account of lease rental paid for the cars - AO was of the view that the expenditure incurred on lease rental are in the nature of capital expenditure - Held that - We find that the issu9e under dispute is covered by the decision of the Hon ble Supreme Court in the case of ICDS Ltd 2013 (1) TMI 344 - SUPREME COURT decided in favour of the assessee Addition on account of waiver of loan - Held that - We note the loan amount was taken by the assessee through cheque / cash. The ld. DR has also not brought anything on record contrary to the argument of ld. AR. Thus in our considered opinion the amount of loan waived off by the assessee is capital transaction and outside the purview of tax net. Hence the ground raised by the Revenue is dismissed
Issues Involved:
1. Validity of the assessment order 2. Determination of arm's length price (ALP) for Management Support Services 3. Determination of ALP for IT Services 4. Rule of consistency in transfer pricing 5. Determination of ALP for Software Segment 6. Variation of 5% from the arithmetic mean 7. Depreciation on moulds 8. Short credit of tax deducted at source (TDS) 9. Interest under section 234A 10. Interest under section 234B 11. Interest under section 234D 12. Interest under section 244A 13. Penalty under section 271(1)(c) 14. Dividend Distribution Tax (DDT) Detailed Analysis: 1. Validity of the assessment order: The assessee contended that the assessment order passed under section 143(3) read with section 144C and the order by the Transfer Pricing Officer (TPO) under section 92CA(3) were bad in law and void ab initio. The Dispute Resolution Panel (DRP) did not hold the order of the TPO and the draft order of the AO to be void ab initio. 2. Determination of ALP for Management Support Services: The TPO made an adjustment of ?202,71,59,953 to the ALP of the international transaction related to Management Support Services, concluding the ALP for services provided by the Associated Enterprise (AE) under the Management Support Services agreement to be Nil. The DRP upheld the TPO's findings, stating that the services were of a duplicative nature and did not provide any benefit to the recipient enterprise. However, the ITAT reversed the order, noting that the assessee had actually received the services and that the services were not in the nature of stewardship services, following the principle of consistency from earlier years. 3. Determination of ALP for IT Services: The TPO made an adjustment of ?35,526,652 to the ALP of the international transaction related to IT Services, concluding that the services received were in the nature of stewardship services. The DRP upheld the TPO's findings. However, the ITAT reversed the order, noting that the assessee had been claiming IT expenses for several years without denial and applying the principle of consistency. 4. Rule of consistency in transfer pricing: The assessee argued that the payments made for management support services and IT services had been accepted as at arm's length in preceding years. The ITAT upheld this argument, emphasizing the principle of consistency and referring to the Supreme Court's decision in Radhasaomi Satsang vs. CIT. 5. Determination of ALP for Software Segment: The TPO made an adjustment of ?16,27,69,727 to the ALP of international transactions related to software development services. The DRP partially upheld the TPO's findings but directed adjustments for working capital. The ITAT directed the TPO to correctly work out the PLI and provide working capital adjustments, excluding certain companies from the list of comparables due to functional differences and non-availability of segmental reporting. 6. Variation of 5% from the arithmetic mean: The ITAT did not adjudicate this issue as the assessee was getting relief on the selection of comparable companies, making the issue infructuous. 7. Depreciation on moulds: The AO disallowed excess depreciation claimed on moulds, stating that the assessee did not have a plastic factory. The DRP upheld this view. The ITAT restored the matter to the AO for fresh adjudication, directing the assessee to produce necessary documents to support its claim. 8. Short credit of tax deducted at source (TDS): The AO granted TDS credit of ?3,71,65,130 instead of ?4,84,89,927. The ITAT directed the AO to grant the correct amount of TDS as per the law. 9. Interest under section 234A: The AO levied interest of ?1,35,46,528 under section 234A. The ITAT directed the AO to grant consequential relief. 10. Interest under section 234B: The AO levied interest of ?39,96,22,576 under section 234B. The ITAT directed the AO to grant consequential relief. 11. Interest under section 234D: The AO levied interest of ?1,61,67,498 under section 234D. The ITAT directed the AO to grant consequential relief. 12. Interest under section 244A: The AO recovered interest of ?42,39,613 under section 244A. The ITAT directed the AO to grant consequential relief. 13. Penalty under section 271(1)(c): The AO initiated penalty proceedings under section 271(1)(c). The ITAT noted that the issue of penalty proceedings was not arising from the order of the authorities below, making the ground infructuous. 14. Dividend Distribution Tax (DDT): The AO charged DDT along with surcharge at 7.5% instead of 5%. The ITAT directed the AO to levy the surcharge at 5% applicable for the AY 2012-13. Summary of Judgments: - The ITAT reversed the adjustments made by the TPO and upheld by the DRP regarding Management Support Services and IT Services, applying the principle of consistency. - The ITAT directed the TPO to correctly work out the PLI and provide working capital adjustments for the Software Segment. - The ITAT restored the issue of depreciation on moulds to the AO for fresh adjudication. - The ITAT directed the AO to grant the correct amount of TDS credit and consequential relief for interest under sections 234A, 234B, 234D, and 244A. - The ITAT dismissed the ground regarding penalty proceedings as infructuous. - The ITAT directed the AO to levy the correct surcharge on DDT.
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