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2024 (6) TMI 328 - AT - Income TaxTP adjustment in respect of payment of management fees - HELD THAT - The appellant had entered into a global/regional management service agreement with AEs for providing various services. The appellant had paid management service fee to its AE on the basis of agreement entered into by the parties and claimed that the fee has been paid for rendering various services. TPO had made adjustment towards management fee on the ground that the assessee could not establish cost benefit from fee paid to AE and also failed to furnish necessary evidence to establish rendering of services by the AE. We find that an identical issue has been considered by the Tribunal in assessee s own case for the earlier A.Y and by considering the relevant facts ITAT in appellant s own case 2023 (6) TMI 258 - ITAT HYDERABAD has set aside the issue to the file of the AO with a direction to re-examine the claim of the assessee in light of agreement between the parties and any other evidences that may be filed by the assessee to prove its claim. In this view of the matter and consistent with the view taken by the Coordinate Bench in appellant s own case for the A.Y 2018-19 2023 (6) TMI 258 - ITAT HYDERABAD we are of the considered opinion that the issue needs to go back to the file of the Assessing Officer/TPO for fresh examination of the facts in light of agreement between the parties and any other evidence that may be filed by the assessee to justify payment of management fees. Thus we set aside the order of the AO and restore the issue to the file of the AO/TPO. TP adjustment by imputing the interest on outstanding receivables relating to provision of services to its AEs - AO has made TP adjustment in respect of receivable from its AE on the ground that the assessee has allowed abnormal credit period when compared to normal credit period allowed to third parties - HELD THAT - This issue is no longer res-integra. The Coordinate Bench of the Tribunal in appellant s own case 2023 (6) TMI 258 - ITAT HYDERABAD for A.Y 2018-19 has considered an identical issue and after considering the relevant facts and also by following certain judicial precedents including the decision of the Hon ble Bombay High Court in the case of CIT vs. Cotton Naturals India (P) Ltd 2015 (3) TMI 1031 - DELHI HIGH COURT held that for the purpose of bench marketing the interest receivable on outstanding receivable from AE the LIBOR 200 basis points is the appropriate rate of interest to be considered by the AO. Thus we direct the AO to recompute the interest receivable on outstanding trade receivable from AE by adopting LIBOR 200 basis points as appropriate rate of interest in place of 14.45% rate adopted by the Assessing Officer. Disallowance of trade mark license fee - HELD THAT - The assessee has paid the trade mark license fees in pursuant to an agreement with licensor Taylor Nelson Sofres Mode Private Limited UK. AO has disallowed the trade mark license fee on the ground that the assessee could not file necessary agreement to prove the payment. We find the assessee has entered into agreement with the Licensor of trade mark and also paid similar payment for earlier A.Ys. The Tribunal has considered the issue for earlier A.Y 2011-12 2021 (10) TMI 1382 - ITAT HYDERABAD and after considering the relevant agreement between the parties has set aside the issue to the file of the Assessing Officer for fresh verification of the fact. The appellant claims that the appellant for this A.Y had also paid trade mark license fee in pursuant to same agreement between the same parties. Therefore we are of the considered opinion that the matter needs to go back to the file of the Assessing Officer for further verification. Short credit for TDS - HELD THAT - We find that the credit for TDS needs to be allowed on the basis of evidences filed by the assessee including the relevant TDS certificate and credits appearing in relevant Form 26AS etc. Therefore we direct the Assessing Officer to verify the claim of the assessee in the light of the evidences if any that may be filed by the assessee to prove its claim and allow the credit for TDS in accordance with law.
Issues Involved:
1. Transfer Pricing Adjustment for Management Fees 2. Transfer Pricing Adjustment for Interest on Receivables 3. Disallowance of Trademark License Fees 4. Allowance of TDS Credit 5. Initiation of Penalty Proceedings Detailed Analysis: 1. Transfer Pricing Adjustment for Management Fees: The first issue pertains to the TP adjustment concerning the payment of management fees amounting to Rs. 6,81,87,820/-. The assessee argued that this issue is covered in their favor based on a previous decision by the Tribunal for the A.Y 2018-19, where a similar issue was remanded back to the Assessing Officer for fresh factual verification. The Tribunal noted that the appellant had entered into a global/regional management service agreement with its AEs and paid management fees based on this agreement. However, the TPO made adjustments, citing the assessee's failure to establish the cost-benefit and provide necessary evidence. The Tribunal decided to remand the issue back to the Assessing Officer for fresh examination in light of the agreement and any additional evidence provided by the assessee. 2. Transfer Pricing Adjustment for Interest on Receivables: The second issue concerns the TP adjustment by imputing interest on outstanding receivables related to services provided to AEs. The TPO benchmarked the trade receivables by adopting a 14.45% interest rate per annum, suggesting a TP adjustment of Rs. 2,48,39,209/-. The assessee contended that this issue was also covered by a previous Tribunal decision for A.Y 2018-19, which directed the use of LIBOR + 200 basis points for benchmarking interest on outstanding receivables. The Tribunal, agreeing with the assessee, directed the Assessing Officer to recompute the interest receivable using LIBOR + 200 basis points instead of the 14.45% rate. 3. Disallowance of Trademark License Fees: The third issue involves the disallowance of trademark license fees amounting to Rs. 2,49,14,250/-. The Assessing Officer disallowed the fees on the grounds that the assessee failed to provide the necessary agreement to substantiate the payment. The assessee argued that similar fees were paid in earlier years under an agreement with Taylor Nelson Sofres Mode Private Limited. The Tribunal noted that the issue had been previously remanded for verification in earlier years and decided to remand it again to the Assessing Officer for further verification in light of the agreement and any additional evidence provided by the assessee. 4. Allowance of TDS Credit: The fourth issue pertains to the short credit for TDS. The assessee claimed TDS of Rs. 12,25,25,224/-, whereas the Assessing Officer allowed only Rs. 12,24,29,606/-. The Tribunal directed the Assessing Officer to verify the claim based on the evidence, including TDS certificates and Form 26AS, and to allow the credit accordingly. 5. Initiation of Penalty Proceedings: The fifth issue involves the initiation of penalty proceedings under sections 271(1)(c), 271AA, and 271BA of the Act. The Tribunal did not provide a detailed analysis of this issue in the judgment. Conclusion: The Tribunal allowed the appeal for statistical purposes, remanding several issues back to the Assessing Officer for fresh verification and determination in accordance with the law. The order was pronounced in the Open Court on 3rd June 2024.
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