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2020 (4) TMI 714 - AT - Income TaxTP Adjustment - method of benchmarking international transactions entered into by the assessee with it Associated Enterprise (AE) - assessee selected AE as tested party and selected 16 companies as comparable to benchmark the transaction - HELD THAT - Transfer pricing adjustment at nil fails on both counts. Firstly on the account of benefit test which is not to be applied by the TPO and secondly none of the method of benchmarking the international transaction as specified in section 92C has been applied. Disallowance of TDS credit - assessee pointed that TDS reflected in Form 26AS in respect of certain payments has been offered to tax by the assessee in subsequent assessment years as the payment was actually received by the assessee during the later assessment year - HELD THAT - After considering the submissions of ld.Authorized Representative of the assessee we deem it appropriate to restore this issue back to the file of Assessing Officer. The Assessing Officer is directed to grant TDS credit to the assessee in the year in which the assessee has received the income and has offered the same to tax. Grant of TDS credit and grant of interest u/s 244A - assessee pointed that rectification petition has already been filed before the Assessing Officer and the same is still pending for the disposal - HELD THAT - AO is directed to dispose of the rectification petition filed by the assessee expeditiously, preferably within a period of three months from the date of receipt of this order.
Issues Involved:
1. Benchmarking of international transactions with Associated Enterprises (AEs). 2. Disallowance of TDS credit. 3. Short grant of TDS credit and interest under section 244A. 4. Initiation of penalty under section 271(1)(c). Detailed Analysis: 1. Benchmarking of International Transactions with Associated Enterprises (AEs): The assessee, engaged in providing research-based consultancy services in brand building, entered into international transactions with its AEs, similar to those in the assessment year 2011-12. Payments of ?7.54 crores were made towards intra-group services. The Transfer Pricing Officer (TPO) determined the Arms Length Price (ALP) of these services at 'Nil', as the assessee failed to demonstrate the services rendered and the benefits derived. The Dispute Resolution Panel (DRP) upheld this finding. However, the Tribunal, referencing a prior decision in the assessee's case for AY 2011-12 and the Hon'ble Jurisdictional High Court's decision in CIT vs. Johnson & Johnson Ltd., ruled that the TPO exceeded its jurisdiction by applying a benefit test, which is the Assessing Officer's domain. The Tribunal emphasized that the TPO must use one of the specified methods under section 92C for benchmarking. Consequently, the Tribunal set aside the orders determining the ALP at 'Nil' and ruled in favor of the assessee. 2. Disallowance of TDS Credit: The assessee contended that TDS credit should be allowed in the year the income is offered to tax, as per section 199. The Assessing Officer had allowed TDS credit in the year it was deducted, causing a mismatch with Form 26AS. The Tribunal restored this issue to the Assessing Officer, directing that TDS credit be granted in the year the income was received and offered to tax. 3. Short Grant of TDS Credit and Interest under Section 244A: The assessee's grounds regarding the short grant of TDS credit of ?98,92,295 and interest under section 244A were addressed by noting that a rectification petition was pending before the Assessing Officer. The Tribunal directed the Assessing Officer to dispose of the rectification petition expeditiously, preferably within three months from the receipt of the order. 4. Initiation of Penalty under Section 271(1)(c): The assessee's ground against the initiation of penalty under section 271(1)(c) was deemed premature and dismissed accordingly. Conclusion: The appeal was partly allowed. The Tribunal ruled in favor of the assessee on the benchmarking issue by setting aside the ALP determination at 'Nil' and directed the Assessing Officer to grant TDS credit appropriately and expedite the rectification petition. The penalty initiation ground was dismissed as premature.
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