9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (9) TMI 242 - AT - Income TaxTP Adjustment - selection of MAM - TNMM or CUP - benchmarking the profits, the assessee has considered TNMM as the most appropriate method and the PLI of the assessee is higher than that of the comparable companies - HELD THAT - In the case of Durr India (P) Ltd 2017 (2) TMI 901 - ITAT CHENNAI the coordinate Bench of Tribunal has held that allocation of cost partly on the basis of turnover and net profit cannot be considered as a factor to propose transfer pricing adjustment. Further, it was held that where the PLI of the assessee under TNMM is at arm s length and it is not possible on the part of the department to identify a comparable, which is rendering similar services, the question of considering CUP method would not arise at all. Since the assessee has stated that all the relevant evidences were already available with the AO/TPO and on that basis; it is required to be verified with regard to availing actual services and its allocation of cost to the assessee. Accordingly, this ground relating to Management fees is remitted to the file of the AO for fresh consideration and the AO after going through the evidences filed by the assessee decide the issue fresh as indicated above. This ground of appeal of the assessee is allowed for statistical purposes. Deduction u/s 10AA - exclusion of freight charges incurred in foreign currency from export turnover - HELD THAT - The case of the assessee is that the Assessing Officer has apportioned freight charges and other expenditure incurred in foreign currency in SEZ and non-SEZ units and recomputed 10AA deduction. It was the explanation of the assessee that freight charges and other expenditure incurred in foreign currency is for non-SEZ units only. It was further submission that the assessee has been maintained separate books of account. Thus, the facts are contradictory. Therefore, we remit the issue back to the AO to examine the claim of the assessee and to compute the 10AA deduction in accordance with law after affording an opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
Issues Involved:
1. Determination of Arm's Length Price (ALP) for management services. 2. Exclusion of freight charges incurred in foreign currency from export turnover for deduction under section 10AA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Determination of Arm's Length Price (ALP) for Management Services: Facts and Proceedings: The assessee, engaged in logistics services, filed its return for the assessment year 2010-11, admitting a loss. The case was selected for scrutiny, and the Assessing Officer (AO) noted that the value of international transactions exceeded the prescribed limit, prompting a reference to the Transfer Pricing Officer (TPO) for determining the ALP. The TPO recommended a downward adjustment of Rs. 5,85,78,200/- to the AE cost, considering the ALP for management services rendered by the AE as NIL. Assessee's Arguments: The assessee argued that the TPO/Dispute Resolution Panel (DRP) failed to identify comparables, which is against the methodologies provided in the Rules. The assessee contended that the management support services were wrongfully categorized as 'shareholding activity' and were deemed to confer no benefit. The assessee cited various judgments where no transfer pricing adjustment was warranted without identifying comparables. Revenue's Arguments: The Department Representative (DR) argued that the TPO adopted the Comparable Uncontrolled Price (CUP) method as the Most Appropriate Method (MAM) and rejected the Transactional Net Margin Method (TNMM) selected by the assessee. The DR emphasized that the management services were routine and in the nature of shareholder activities, which do not justify separate payments. Tribunal's Findings: The Tribunal noted that the assessee had substantiated the services rendered and the benefits derived. The Tribunal referred to the Delhi Tribunal's decision in Showa India (P) Ltd. v. DCIT, emphasizing that the PLI under TNMM was at arm's length, and the CUP method was not applicable without identifying comparables. The Tribunal remitted the issue back to the AO for fresh consideration, directing the AO to verify the evidence and decide the issue afresh. 2. Exclusion of Freight Charges Incurred in Foreign Currency from Export Turnover: Facts and Proceedings: The AO excluded the expenditure incurred in foreign currency from the export turnover for the purpose of deduction under section 10AA. The AO apportioned the expenditure between SEZ and non-SEZ units based on their respective turnovers. Assessee's Arguments: The assessee contended that the freight charges and other expenditures incurred in foreign currency were related to non-SEZ units only and should not be excluded from the export turnover of the SEZ unit. The assessee maintained separate books of account for SEZ and non-SEZ units. Revenue's Arguments: The DR supported the AO's assessment order, emphasizing the need for apportionment of expenses between SEZ and non-SEZ units. Tribunal's Findings: The Tribunal observed that the AO had apportioned the expenses based on turnovers and recomputed the 10AA deduction. The DRP directed the AO to exclude the expenditure from both the numerator and the denominator for the computation of deduction under section 10AA, following the Special Bench decision in ITO v. Sak Soft Ltd. The Tribunal remitted the issue back to the AO to examine the assessee's claim and compute the deduction in accordance with the law, after affording an opportunity of being heard to the assessee. Conclusion: The appeal filed by the assessee was allowed for statistical purposes, with both issues remitted back to the AO for fresh consideration and verification.
|
