2021 (9) TMI 1128 - AT - Income Tax

TP Adjustment - direction of Dispute Resolution Panel (DRP) in determining Arm's Length Price (ALP) at Nil on account of trademark charges - HELD THAT - As explained before the DRP taking support from agreement and invoices, the DRP having no application seeking admission of those documents rejected to take cognizance of said documents as additional evidences. AR fairly conceded these documents were not at all before the TPO and requested for an opportunity to the assessee and remand the matter to the file of TPO for verification afresh in terms of documents filed. DR submits that the said documents and oral submissions as advanced by the ld. AR before this Tribunal were not before the TPO and requires fresh examination in terms of the same - we deem it proper to remand the issue to the file of TPO for its fresh verification in terms of evidences filed before this Tribunal by way of paper book and determine the ALP of international transactions on account of trademark license fees. Thus, ground No. 1 raised by the assessee is allowed for statistical purposes. Treatment of subvention money - Revenue or capital receipt - assessee has been treating the subvention money received as income treating the same as revenue receipt - HELD THAT - As the Hon'ble Supreme Court in the case of Siemens Public Communication Network (P.) Ltd. 2016 (12) TMI 1854 - SUPREME COURT held the same as not a revenue receipt. We note that the details of amounts wherein the assessee received the said amount from its AE for operation support in A.Ys. 2009-10, 2010-11 and 2011-12 Since, it is not before the TPO, upon hearing both the parties, we deem it proper to remand this issue to the file of TPO for verification in terms of the principle laid down by the Hon'ble Supreme Court in the case of Siemens Public Communication Network (P.) Ltd. (supra). The assessee is liberty to file evidences, if any, in support of its claim.

Summary

Issues involved:
1. Challenge to final assessment order on Arm's Length Price (ALP) for trademark charges.
2. Adequate opportunity of being heard before passing transfer pricing order.
3. Treatment of subvention money as income.

Issue 1: Challenge to final assessment order on ALP for trademark charges
The appellant contested the final assessment order by the TPO/DCIT concerning the determination of ALP at Nil for trademark charges. The appellant argued that the cost allocation for trademark license fees to its AE was in line with the Group pricing policy, providing tangible benefits in terms of services income and customer base. However, the TPO found the appellant's evidence lacking and set the ALP at Nil due to insufficient documentation. The DRP upheld this decision, noting the absence of a formal request to admit additional evidence supporting the trademark charges. Before the ITAT, the appellant presented the agreement and invoices supporting the trademark fees, which were not before the TPO during the initial assessment. Consequently, the ITAT remanded the issue to the TPO for fresh verification based on the new evidence presented.

Issue 2: Adequate opportunity of being heard before passing transfer pricing order
The appellant raised concerns about the TPO not providing sufficient opportunity to be heard before finalizing the transfer pricing order. The DRP confirmed that although the appellant submitted additional documents post the TPO's order, they did not formally request their admission as evidence. As a result, the DRP did not consider these documents, leading to the affirmation of the TPO's decision. However, before the ITAT, the appellant successfully demonstrated that crucial evidence supporting the trademark charges was not available to the TPO during the initial assessment. Consequently, the ITAT remanded the issue to the TPO for a fresh examination based on the new evidence.

Issue 3: Treatment of subvention money as income
The appellant, for the first time before the ITAT, raised the issue of treating subvention money as income based on a legal ground citing a Supreme Court decision. The appellant had historically treated the subvention money as income, but the Supreme Court ruling indicated otherwise. Since this issue was not presented before the TPO, the ITAT decided to remand it to the TPO for verification in line with the Supreme Court's directive. The appellant was granted the liberty to provide additional evidence to support their claim regarding the treatment of subvention money. Consequently, the ITAT allowed this ground for statistical purposes.

In conclusion, the ITAT remanded the issues related to trademark charges and subvention money back to the TPO for fresh verification based on new evidence presented before the tribunal. The appellant's appeal was allowed for statistical purposes, highlighting the need for a comprehensive review of the issues at hand.